Frequently Asked
Questions

A life settlement is a legitimate and reliable option to turn your unused life insurance policy into usable cash.

A life settlement is the sale of a life insurance policy to a third party for cash. Typically performed by individuals aged 65 and older, a life settlement will always exceed the cash surrender value of your policy, but it will always be lower than the death benefit of your policy.

• Depending on the terms of the policy you own, changes in the insurance market could drive up the price of your premiums. Many potential policy sellers are nearing a policy lapse and, rather than surrendering the policy back to the insurance company, choose to make a life settlement instead.
• Others sell their policy with retirement benefits in mind. A life settlement is an excellent way to supplement savings in your golden years — the premium payment is eliminated, and clients often receive a large cash sum.
• Selling your life insurance is a viable alternative when it comes to handling medical bills. We connect clients with providers that have assisted thousands of people with serious illnesses.
• As a person transitions through various stages in life, they may find they no longer need their policy. Instead of surrendering it and receiving less, a life settlement can be a financially beneficial alternative.

We here at Abacus are dedicated to making sure you have the knowledge and resources to make the best decision for you. Reach out to us and we will walk you through the process and all the benefits.

A viatical settlement is the sale of a life insurance policy by a terminally ill policyholder, allowing the policyholder to benefit from the proceeds while still living. The sale of a life insurance policy will always exceed the cash surrender value of your policy but will always be lower than the death benefit of your policy.

With the cost of healthcare rising, a viatical settlement can be a strong financial solution for those facing a terminal illness. Patients and their families can receive immediate funds to pay for medical care or quality-of-life experiences. Funds can be used to pay off bills or try alternative treatments that may not be covered under health insurance.

The death benefit of a life insurance policy is the cash payout the beneficiaries receive when the insured individual dies.

A retained death benefit (RDB) is a life settlement option that allows a policy owner (seller) to retain a portion of their life insurance policy's death benefit for the beneficiary of their choice, in lieu of receiving a cash-only lump-sum settlement (a typical life settlement offer).

Abacus Life is more than a life settlement company. We work with each client on an individual basis to provide options based on their unique situation. In addition to settlement options, we are proud to offer retained death benefit (RDB) options — a great choice for individuals looking to eliminate expensive premium payments while keeping a portion of their life insurance coverage.

The cash surrender value of a life insurance policy is the cash payout a policyholder receives when they cancel their policy. This will always be less than the death benefit or life settlement benefit of a policy. The cash surrender value is equal to the total cash value of your policy minus the cost of any cancellation fees.

A life insurance policy "illustration" is a set of projections prepared by the actuarial department of the insurance company. It depicts how a policy will perform over its lifetime, including financial projections for each year.

For term policies, projections extend to the end of the policy's term. For permanent life insurance policies, projections extend well beyond your 100th birthday. A projection typically shows both the current and maximum premiums for each year, total premiums paid up to that year, and each year's death benefits.

If your policy has "re-entry" provisions for certain years — requiring you to qualify for the benefits through a physical exam, for example — there are columns showing the premiums if you passed (or "re-entered") or failed the company's medical requirements.

The 3 main types of life insurance policies are universal, whole life, and term life.

Universal Life — Universal life insurance is permanent life insurance with an investment savings element and low premiums, similar to term life insurance. Most universal life insurance policies contain a flexible premium option. However, some require a single premium (single lump-sum premium) or fixed premiums (scheduled fixed premiums).

Whole Life — Whole life insurance provides coverage for the life of the insured. In addition to providing a death benefit, whole life insurance contains a savings component where cash value may accumulate. These policies are also known as permanent or traditional life insurance.

Term Life — Term life insurance, also known as pure life insurance, guarantees payment of a stated death benefit if the covered person dies during a specified term. Once the term expires, the policyholder can renew it, convert the policy to permanent coverage, or allow the policy to terminate.

There are many different types of universal, whole, and term life insurance policies, each with its own specific benefits based on coverage amount, premium payments, investment strategies, and more.

• Age / Health: Most individuals who sell their life insurance policy are 65 years of age or older, or have a serious medical condition that deems them terminally ill.
• Policy Type: Universal, whole-life, and convertible-term policies are all eligible for life settlement.
• Policy Size: The value of your policy must be $100,000 or larger to qualify for settlement options.

People aged 65 and older are often eligible to sell their life insurance policy if the face value of the policy exceeds $100,000. The most commonly sold types of life insurance are universal life insurance policies and other permanent policies like whole life. However, a variety of policy types can be sold.

Speak with your Abacus representative to find out which option is best for you!

• High Premiums: Premiums are more expensive the older an individual becomes. If you are on a fixed income during retirement or have unforeseen medical expenses, paying high premiums can feel impossible. You will always receive more money from a settlement than by surrendering a life insurance policy.
• It is No Longer Needed: When beneficiaries are no longer dependent on making a claim to continue their lifestyle, it can make more sense to sell your policy for usable cash now rather than keep it active.
• Extra Income: For retirement, medical expenses, or any other reason, many individuals find they need extra income in their golden years. Selling your policy can supplement income while also eliminating the need to pay high premiums.
• Term Policy Expiration: Many term policies do not offer a cash value at expiration, and renewal costs can be high. An alternative is to convert a term policy into a universal life policy and sell it for cash.

• 1
  Application: Start by filling out our online application or call to speak with one of our life settlement specialists at 1 (800) 561-4148. You will be asked questions about basic personal information, health, and your life insurance policy. Medical release forms are then signed, allowing Abacus Life to access your medical records and policy information.
• 2
  Documentation: Abacus Life, using the medical release forms provided, acquires your basic health and life insurance policy information. A doctor's appointment may be required to obtain a medical release form.
• 3
  Review: Once all required information is gathered, we review your policy information and decide whether or not to make an offer. This is completed on an individual basis, as each case is unique.
• 4
  Offer: If an offer is made, it will be communicated to the policyholder or advisor (your broker or insurance agent) as applicable.
• 5
  Closing Package: If an offer is accepted, Abacus Life will put together a closing package. Common documents include a letter of competency (LOC), verification of coverage (VOC), life settlement contract, life expectancy reports, change of ownership form (COO), and a change of beneficiary form (COB). We will explain everything every step of the way.
• 6
  Funds Transfer: Once the closing package is completed and change of ownership documents verified, Abacus Life owns your policy. You no longer pay premiums, and your funds are on their way via direct deposit, check, or a series of pre-determined payments.

Getting started is simple. We here at Abacus Life have perfected the onboarding process to life settlements.

The first step is to get qualified. See if you qualify to sell your life insurance policy by filling out our simple online calculator or call to speak with a settlement specialist at 1-800-561-4148. We are excited to help you begin your life settlement journey and will guide you every step of the way!

• Policy Type
• Policy Face Value
• Age
• Health Status

Settlement companies use these factors to compile an offer for each policy on an individual basis. Once all factors are taken into consideration, an offer is written up.

The average payout of a life insurance sale is 4–6 times the cash surrender value of the policy. At Abacus Life, we pay a policyholder an average of 6–8 times the cash surrender value of their life insurance policy. Being a direct buyer, Abacus has created a streamlined process to make selling your policy fast while cutting out the middleman so we can pay you more.

• Money received from a life settlement up to the tax basis is free of income tax.
• Money received that is greater than the tax basis, but less than the cash surrender value, is taxed at ordinary income rates.
• Money received that exceeds the cash value of your policy is taxed as capital gain.

The amount of taxable income is calculated by subtracting the total amount you have paid in premiums (your tax basis) from the settlement amount.

Death benefit proceeds received by beneficiaries: Due to the death of the insured person, death benefit proceeds are not included in gross income and do not have to be reported. However, any interest you receive is taxable and should be reported as interest received.

NCOIL Model Act: NCOIL writes model laws in insurance and financial services that work to preserve state jurisdiction. View the NCOIL Model Act.

Senior Health Planning Account Act: This bill allows tax-exempt senior health planning accounts to be funded using a taxpayer's gains from the sale or assignment of a life insurance contract. View the SHPA Act.

Regulations vary by state. Most states regulate the length of time a policy must be owned until it can be sold, agent and broker licensing requirements, disclosure of offers, taxation, and alternatives — all done to protect policyholders.

In addition to state regulations, The Life Insurance Settlement Association (LISA) monitors best practices among life insurance agencies, acting as a governing body.

• 1
  Do your research: Start by researching each company you are considering working with. Look at the bottom of their website to see if they are a direct buyer, broker, or marketing office. This distinction matters for your privacy. Marketing offices often pass your personal information on to other companies to acquire multiple bids. By researching first, you can guarantee that your confidential data is kept secure.
• 2
  Take notice of how you are treated: Pay attention to how you are treated throughout the quote and offer processes. Selling your life insurance policy requires a long-term relationship. If a company is putting excessive pressure on you to sell, using tactics that do not align with your best interest, or are difficult to contact, this behavior is likely to continue throughout the years.
• 3
  Remember you are not obligated to sell: When you request to see what your policy is worth, remember that you are not obligated to sell — it is a choice. If you are too young or healthy, we may recommend waiting a few years before selling to receive a higher payout. At Abacus, we provide complete transparency regarding how we generate each offer and keep you informed throughout the entire process.
• 4
  Know who will own your policy: Marketing offices are not authorized to purchase a life insurance policy. Their only job is to refer you to policy buyers. Make sure you know who the buyer will be so you can stay in contact throughout the life of the policy. It is a long-term relationship, so you should feel confident in who you choose to trust with your policy.