1. Deciding to sell
Before making a decision, the policyholder and their beneficiaries must make the conscious decision to pursue this option. This means contacting your financial advisor or the Abacus team and looking into all alternatives to make sure that it is the most advantageous solution for you.
2. Determine Eligibility
There are certain specifics that determine if an individual will qualify, such as premiums, the life expectancy of the insured, and the death benefit. At this point, an Abacus representative would contact the insured to inquire about their age and any medical ailments. The information disclosed will be used by an in-house medical underwriter who will calculate the insured’s life expectancy and determine how much the policy is worth at no cost to the insured.
Abacus, or the chosen buyer, would then extend an offer to the insured. The offer would be more than the price, but less than the net death benefit. The buyer must be licensed in the state in which the owner of policy resides.
If the amount offered by the licensed buyer is acceptable to the policy seller, they can choose to accept the offer and request the required documents for review.
At this time, the licensed buyer generates state-approved contracting documents. These documents are utilized to record the life settlement transaction as well as spell out the agreement between the seller and the purchaser. Both parties must sign and notarize the contracts.
Once the contracts are executed and all the required accompanying documents have been received, the verification process begins. Often completed by a third party like a law firm, this verification agent will check that all the contracting documents have been completed properly. They may also check that the policy is in full force and good standing with the insurance company. They will verify that the funds for the purchase have been put in an escrow account for the policy seller.
7. Ownership Change
Subsequently, a request for ownership change will be sent to the insurance carrier. This ensures that the owner is changed from the current policyholder to the buyer or the financing entity that the buyer names as owner.
After the insurance carrier has confirmed that the purchaser is listed as the owner, the escrow agent is instructed to release the funds to the seller. The new owner is now responsible for all premiums going forward and the seller has received payment for the transaction.
This concludes the transaction and the insured is free to use the money at their discretion.