A life settlement is a financial transaction whereby a third party acquires an unneeded or unwanted life insurance policy from the policy holder. Life settlements provide seniors a secondary market for life insurance in which the policy owner can determine fair market value for their policy. This value may be higher than the cash surrender value from the issuing life insurance company. The purchaser becomes the new beneficiary of the policy at maturation and is responsible for all subsequent premium payments.
The following is intended to provide a broad overview of life settlements and answer some basic questions.
You should talk to a trusted financial advisor before making any decision.
What is a Life Insurance Settlement?
A senior life settlement allows seniors typically over the age of 65 to sell existing unwanted, obsolete or unaffordable life insurance policies to investing financial institutions for a lump sum cash settlement.
What are the benefits of a Life Insurance Settlement?
Settlements can help seniors to:
Stop paying premiums for unwanted policies and still receive funds higher then the surrender value offered by the carrier. Use funds for retirement. Use funds for health treatments or long term care. Use funds for other investment or any other purpose Other life settlement benefits for seniors
What are the requirements to qualify for a Life Insurance
In order to qualify for selling your life insurance policy:
The policy holder must be at least 65 years old. The policy must have been in force for at least 2 years The policy holder must be a USA or Canadian Resident.
Life settlements allow seniors to benefit from their policies when they need it the most.
Here are some additional considerations
Why use a Life Settlement Broker?
Usually cases are brought to market for purchase through a licensed
Life Settlement Broker vs. a Life Settlement Provider. This insures
that the policy owner will, usually, get multiply offers and maximize
their sale price.
Some policy owners go direct to the buyers (Life Settlement Providers) themselves. Working with a Life Settlement Provider directly only gets a single purchase quote, not multiply offers.
Providers are companies that manage the life settlement process for the ultimate buyer. We work with approximately 36 providers who represent about 100+ sources of capital. There are some cases where we go direct to the end buyer.
Providers want to buy the policy as cheap as possible, with as little competition as possible.
How much money will I get if I sell my Life Insurance policy? The value of a life insurance policy is determined by a number of factors, including, but not limited to, the age and medical condition of the insured, type of insurance policy, rating of the issuing insurance company and amount of premium payments to keep the life insurance policy in force.
What type of Life Insurance policies can be sold? Most types of life insurance policies can qualify, however, the most common are Universal Life, Whole Life, and convertible Term Life.
Why would I consider selling my life insurance policy?
The policy is no longer needed or wanted To pay for healthcare costs Premium payments have become unaffordable Considering lapse or surrender of the policy Change in estate planning needs
The following is intended to provide a broad overview of annuities and answer some basic questions.
If you are interested in annuities, we encourage you to learn as much as you can about a particular product and talk to a financial counselor you trust before making any purchase decision.
What Is An Annuity?
An annuity is an insurance product designed to provide income -- either at some future date or immediately. With any annuity, the consumer makes at least one payment (called a "premium") to an insurance company. The insurance company, in turn, agrees to provide income payments to the consumer in the future or right away. Because there are several different varieties of annuities, it is easiest to break them into two broad groups -- deferred annuities (those designed to pay in the future) and immediate annuities (those designed to provide income immediately.)
What should one look for in an annuity provider?
When purchasing an annuity from an insurance company, you are placing your money, your trust and part of your future financial well-being with that company. Be sure that the company you choose has a long track record of meeting its financial obligations and is financially strong. By researching and comparing the financial condition and credit ratings of several insurance companies you will be able to make an informed decision.
For more information on either deferred
or immediate annuities.
What is a deferred annuity?
A deferred annuity is an insurance product designed to provide income at some time in the future - typically during retirement. The idea is to let the premium payment you made to the insurance company accumulate tax-deferred for a number of years.
If you choose a fixed, deferred annuity, your money will accumulate at a fixed rate guaranteed* by the insurance company for a specified period of time.
If you choose a variable, deferred annuity, your money will accumulate at a variable rate, based upon the performance of the underlying investments. The investment return and the value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.
When you no longer wish to keep accumulating funds in your annuity, you may take the money out as a lump sum or annuitize it (convert it to income payments). If you annuitize, you have a choice of several standard pay-out options. Liquidations of earnings are subject to ordinary income tax and, if taken prior to age 59 1/2, a 10% federal income tax penalty may also apply.
Fixed, Deferred Annuities
What is a fixed, deferred annuity? A fixed, deferred annuity is an insurance product that offers a fixed interest rate guaranteed* by an insurance company for a specified period of time (sometimes called a guarantee period ). With this form of retirement savings, the premium you pay to the insurance company accumulates on a tax-deferred basis and the insurance company usually guarantees* the return of your principal investment.
Mr. and Mrs. Smith, both in their early 50's, have received a $40,000 inheritance and would like to use this money for their retirement income later on. Their financial advisor has explained that an annuity may be a suitable product for them. The Smiths have a very low risk tolerance and they will need this money for their retirement. They decide that a fixed, deferred annuity is perfect for them because they do not need the money right now and they do not want to risk losing their principal investment.
What are the advantages of a fixed, deferred annuity?
Tax-deferred accumulation Guaranteed return of principal* Guaranteed interest rate* Choice of guarantee period with many fixed annuities Not subject to stock and bond market fluctuations No fees or charges with many fixed annuities.
What are the disadvantages of a fixed,
For what type of investor is a fixed,
deferred annuity suitable?
It may be a suitable investment for someone:
Seeking a fixed rate of return Wishing to diversify their overall retirement investment portfolio Who has already reached maximum contribution levels in a 401(k) plan and any IRAs they may have. Not wanting to worry about market fluctuations or having to actively manage their investments.
May one make withdrawals from a fixed, deferred annuity? Certain withdrawals from fixed, deferred annuities may be subject to:
Surrender charges On many annuities, the insurer may assess a surrender charge -- typically ranging from 7 percent to 1 percent of the withdrawal amount, based on a schedule where the amount of the surrender charge declines over time. There are some exceptions. Some annuities allow the annuitant to annually withdraw a certain amount (for example 10%) without a surrender charge.
Market value adjustments/p> Some fixed annuities contain a market value adjustment that applies when you take a full or partial distribution. With some types of fixed annuities, the market value adjustment may increase or decrease the value of your distribution, depending whether the interest rates currently being offered for your type of annuity have risen or fallen since your guarantee period began. If they've fallen, the adjustment may result in a higher payment. If they've risen, your payment may be lower. With some types of annuities, there is no market value adjustment if you surrender your annuity at the end of a guarantee period.
Federal income tax penalties. Withdrawals before age 59 1/2 may be subject to a 10 percent Federal Income Tax penalty. Ask your financial consultant if any of these apply with the annuity you are considering.
Pay-out options available
Most annuities offer several standard pay-out options - ranging from pay-outs for a specified period of time (Period Certain), to pay-outs for life.
Variable, Deferred Annuities
What is a variable, deferred annuity?
A variable, deferred annuity is a long-term insurance product that enables the premium paid to the insurance company to accumulate tax-deferred with a variable rate of return. Within the annuity, there is a choice of investment options (called sub-accounts) that will allow for management of investment choices over time. The sub-accounts invest in underlying funds that, in turn, invest in various types of securities (i.e.,stocks, bonds, money market instruments) each with a different risk/return profile. The return on your annuity will depend on the performance of the investment options you choose.
Nancy Edwards, 56, makes the maximum contribution to her 401(k) plan at work each year and also has an IRA to which she contributes the maximum annual amount. This year, she receives a bonus for which she doesn't have an immediate need. She decides she would like to invest $15,000 of her bonus and let the earnings accumulate on a tax-deferred basis. Knowing that Nancy is financially savvy and is a moderately aggressive investor, her financial advisor suggests a variable, deferred annuity with a mix of equity and bond investment options. Nancy is willing to take the risk of either profiting or losing from this investment.
What are the disadvantages of a variable, deferred annuity?
Tax-deferred accumulation Ability to choose among investment options Potential for more rapid accumulation than with a fixed annuity.
For what type of investor is a variable, deferred annuity suitable?
No guaranteed rate of return on variable investment options No guarantee of principal Not a liquid investment. Liquidation of earnings is subject to ordinary income tax and, if taken prior to age 59 1/2, a 10% federal income tax penalty may also apply. Early surrender charges may also apply. Subject to fees and charges from the annuity contract and from the underlying investments.
A variable, deferred annuity can be a suitable investment for someone:
May one make withdrawals from a variable, deferred annuity? Certain withdrawals from variable, deferred annuities may be subject to:
Who does not require a fixed rate of return and with a tolerance for risk Who has already reached maximum contribution levels in his or her 401(k) plan and in any IRAs Who likes to manage their own investments
On many annuities, the insurer may assess a surrender charge -- typically ranging from 7% to 1% of the withdrawal amount, based on a schedule where the amount of the surrender charge declines over time. There are some exceptions. Some annuities allow the annuitant to annually withdraw a certain amount (for example 10%) without a surrender charge.
Federal income tax penalties
Withdrawals before age 59 1/2 may be subject to a 10 percent Federal Income Tax penalty. When speaking with your financial consultant, ask if any of these apply with the annuity you are considering.
What pay-out options are available when I get ready to receive income from my annuity? Most annuities offer several standard pay-out options - ranging from pay-outs for a specified period of time to pay-outs for life.
What is an immediate annuity?
An immediate annuity is an insurance product designed to convert assets into income immediately (typically within 30 days and seldom longer than 12 months from the date of purchase). The consumer pays a premium to the insurance company and the insurance company makes a stream of periodic, income pay-outs** to the annuitant. As is the case with deferred annuities, immediate annuities can either be fixed or variable.
With a fixed, immediate annuity, your periodic pay-out amount will always stay the same. With a variable, immediate annuity, your periodic pay-out amount will fluctuate, based on the performance of the investment options you have chosen within the annuity.
Fixed, Immediate Annuities
A fixed, immediate annuity is an insurance product that offers a fixed, periodic payment to you, the annuitant, to begin shortly (usually about a month) after you pay your premium to the insurance company. You choose the time frame over which you will receive your pay-outs. Either for a specified period (called a Period Certain )or for the rest of your life. The most common usage of this type of annuity is to convert assets into a steady income during retirement.
Mr. Johnson, age 71, is a conservative investor who wants to have additional monthly income. He plans to sell about $50,000 of mutual funds that he currently owns and use the proceeds to buy a 10-year Period Certain Fixed, Immediate Annuity. His fixed pay-outs will begin in about a month. He likes the idea that he won't have to worry about market fluctuations with the mutual funds any more and that his pay-outs will be the same every month. He also likes the fact that, should he die before the 10-year period is over, his beneficiary will receive any remaining payments from that Period Certain.
A variable, deferred annuity can be a suitable investment for someone:
Guaranteed* periodic pay-outs**. Pay-outs begin immediately. Pay-out amount is not subject to market fluctuations.
** Taxable Distributions (and certain deemed distributions) are subject to ordinary income tax.
For what type of investor is a fixed, immediate annuity suitable?
No choice of investment options. Not a liquid investment. Withdrawals are not allowed unless the annuity has a commutation (cancellation) provision. No flexibility. You may not change your pay-out option or your periodic pay-out amount once the pay-outs begin.
Is seeking a fixed, periodic pay-out Does not want to worry about market fluctuations and have to manage their investments.
Can one make withdrawals from a fixed,
immediate annuity? No. Withdrawals from a fixed, immediate annuity may be made only if there is a commutation (cancellation) provision written in your annuity contract.
What pay-out options are available from a fixed, deferred annuity?
Most fixed, deferred annuities offer several standard pay-out options - ranging from pay-outs for a specified period of time (Period Certain) to pay-outs for life.
Variable, Immediate Annuity
What is a variable, immediate annuity?
A variable, immediate annuity is an insurance product designed to produce pay-outs that will vary depending upon the performance of the investment options you choose. At the time you pay your premium to purchase the annuity, you choose from several underlying investment options (called sub-accounts). The sub-accounts, in turn, invest in underlying securities that can range from stocks to bonds to money market instruments. You choose the investment options based your assessment of their potential performance and on your own risk tolerance.
Unlike a fixed, immediate annuity, you may make some changes to your variable, immediate annuity after the pay-outs begin. You may change your investment options as frequently as your particular annuity allows. You may not, however, change your pay-out option.
Mr. and Mrs. Ford, ages 70 and 72, have a sum of money that they would like to use to purchase an annuity. They have discussed with their financial advisor that they already have enough income to fund their retirement. They would like to purchase an annuity and be able to choose their investment options with the potential of profiting from favorable performance. Because the Fords are savvy investors, their financial advisor suggests a variable, immediate annuity because they want to receive pay-outs immediately, but they do not need a defined pay-out.
Ability to choose underlying investment options A stream of periodic income payments**. Potential for higher returns than a fixed annuity.
For what type of investor is a variable, immediate annuity suitable?
Pay-outs are not guaranteed - they are subject to market fluctuations No guaranteed return of principal No liquidity. The only way that withdrawals can be made from an immediate annuity is if there is a commutation provision written in your annuity. Subject to investment management fees and other charges
Is willing to have his or her periodic pay-outs fluctuate No guaranteed return of principal Does not mind managing his or her investments.
Can one make withdrawals from a variable, immediate annuity? No. The only way you can make a withdrawal from a variable, immediate annuity is if there is a commutation (cancellation) provision written in your annuity contract.
What pay-out options are available from a variable, immediate annuity? Most annuities offer several standard pay-out options - ranging from pay-outs for a specified period of time (Period Certain) to pay-outs for life.
Annuity Pay-Out Options
What are the pay-out options if I
choose to annuitize (convert my assets to income payments)?
Both fixed and variable annuities offer similar pay-out options.
|Pay-out Option||Length of Payments||Payment to Beneficiary||Example|
|Life Only Annuity||The annuitant will receive pay-outs for the rest of his or her life. Under this option, it is possible to receive only one pay-out||No death benefit with this option.||John purchases a life annuity and lives for three more years, receiving pay-outs over that time. Upon his death, no death benefit is payable. Susan purchases a life annuity and lives for 25 years, receiving pay-outs over that time. Upon her death, no death benefit is payable.|
|Period Certain Annuity||The annuitant will receive guaranteed* pay-outs for a specified period of time (Period Certain). This period is typically expressed as a number of years (i.e., 10, 15, or 20 years).||If the annuitant dies before the specified period ends, the beneficiary will receive pay-outs for the rest of the Period Certain.||Bill buys a 10-year period certain annuity and he dies in the 3rd year. The beneficiary will receive payments for the remaining 7 years.|
|Life Annuity with Period Certain||The annuitant will receive periodic pay-outs for the longer of his/her lifetime or a specified period (Ex. Life with 10 years certain).||The beneficiary will receive payment if the annuitant dies before the specified period has expired.||Maria buys a Life with 10-year Period Certain annuity and she later dies in the third year. Her beneficiary receives payments for the 7 remaining years. However, if she were to die in the 11th year after purchasing the annuity, the beneficiary would receive nothing.|
|Joint and Survivor Annuity||Payments are made for the duration of 2 lives. Upon the death of the first annuitant, the second annuitant receives a percentage (typically ranging from 50-100%) of the amount the first annuitant received.||No death benefit with this option.||Tom has chosen a Joint and Survivor with 50 percent continuation benefit for him and his spouse, Jill. When Tom dies, Jill will continue to receive pay-outs for the rest of her life, but each pay-out will only be 50% of the periodic pay-out he received. When Jill dies, no death benefit will be payable.|
|Joint and Survivor With Period Certain||Payments are made for the duration of 2 lives. Upon the death of the first annuitant, the second annuitant receives a percentage (typically ranging from 50-100%) of the amount the first annuitant received. In addition, the annuitants may choose a minimum period (Period Certain) over which they will receive guaranteed payments*.||If both annuitants die before the Period Certain ends, a beneficiary will receive any remaining guaranteed* payments.||Jim and Martha purchase a Joint and Survivor Annuity with 50% continuation benefits and a 10-year Period Certain. If Jim dies in year 3, Martha will continue to receive pay-outs, but the amount of each pay-out will be 50% of the amount he received. If Martha dies before the end of the 10th year, any remaining pay-outs will go to a beneficiary. If Martha dies after the end of the 10th year, no death benefit will be payable.|
|Life Annuity with Cash Refund||With this option, the annuitant receives guaranteed* periodic pay-outs for the rest of their life. If the annuitant dies before receiving the amount of his/her premium payment back as pay-outs, any remaining pay-outs go to a beneficiary. NOTE: For immediate annuities, a beneficiary will receive any remaining premium if the annuitant dies before receiving the amount of his or her premium back as pay-outs. For deferred annuities, if the annuitant dies before receiving any pay-outs, the beneficiary will receive the account value of the annuity.||Upon the death of the annuitant, the beneficiary will receive the remainder of the premium (or in the case of a deferred annuity, the account balance.)||Juan makes a premium payment of $100,000 to purchase an immediate Life Annuity with Cash Refund. He dies several years later, after having received only $75,000 back in the form of pay-outs. His beneficiary will receive the remaining $25,000.|
The above information was
Hartford Life Insurance Company
Guaranteed Acceptance Life Insurance
Some companies are now offering Guaranteed Acceptance Life Insurance to people whose age, health or pocketbook may prohibit them from being able to purchase life insurance. Unlike underwritten life insurance policies, you are not required to answer any health questions or take a physical. Usually these plans include a limited benefit period. If death occurs during the first few years, a reduced benefit is payable or the company will return the premiums paid plus interest. This allows the company to guarantee your acceptance. Guaranteed Acceptance Life Insurance provides extra protection to help cover final expenses, unpaid medical bills, outstanding loans and credit card payments. Even if you already have some form of life insurance, you may still be underinsured due to inflation and the rising costs of final expenses.
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