What are life settlements?
A life settlement is the sale of a life insurance policy or
certificate (hereafter referred to as policy) issued on the life of a
person, who does not have a catastrophic or life threatening illness or
condition that is likely to result in death within 24 months, for a dollar
amount that is less than the policy's face value. The person who is
insured under the policy is called a life settlor. This person may or may
not be the owner of the policy. Only the owner of the policy has the right
to sell the policy. If you do not own the policy, the owner cannot sell
the policy without your consent. The entity that buys the policy is called
a life settlement provider (hereafter referred to as provider),
additionally, there are persons called brokers or provider
representatives, who help with the sale of the policy. A life settlement
offers you the opportunity to receive a portion of your policy’s death
benefit while you are still alive.
How do life settlements work?
Most providers, provider
representatives, or brokers will ask you to complete an application and
medical release forms so that they can gather information from your life
insurance company and your doctors. All information gathered must be kept
confidential and cannot be given to anyone without your written approval.
If you qualify, the provider will make you an offer for your policy. The
amount offered for your policy will be based on facts such as how long you
are expected to live, the amount you pay for premiums, the rating of your
insurance company, and your policy’s provisions (e.g., a waiver of
premium). If you accept the offer, you will be asked to sign a life
settlement contract.