Defining a Life Settlement
The simplest definition of a life settlement is the sale of an existing life insurance policy to a third party for more than its cash surrender value, but less than its net death benefit. Viatical settlements are another form of life settlements that are primarily for the chronically or terminally ill.
In terms of a more thorough definition, a life settlement or “senior settlement” is a financial transaction where the owner of an unwanted life insurance policy transfers ownership and beneficiary rights to an institutional investment fund. In exchange for transferring ownership, the insured receives a cash settlement that can often be four times greater than the cash surrender value. A life settlement is not a loan, it is a one-time cash transaction that results in a full transfer of ownership in exchange for a lump sum. The money belongs entirely to the policy seller and can be spent at his or her discretion.
Abacus Life Settlements functions as a provider in the secondary market for life insurance. We facilitate the purchase of each policy by working with institutional investors comprised of hedge funds, insurance companies, banks, pension funds, and other major investment organizations. Abacus provides the policy owner with a lump sum cash payment and the institutional investor takes over future premium payments and receives the death benefit upon the death of the insured.
For more information on the life settlement industry and Abacus, check out our feature in the New York Times.
Senior care can be a rather large expense for many people, including those who have thorough financial plans. Although Peter had some money stored away, he still needed additional funds to cover the costs involved with long-term care as he recently turned 89 years old. With monthly insurance premiums draining his savings, he considered letting his $250,000 policy lapse in order to cut costs, instead, he contacted Abacus. We were able to offer Peter $120,000 for his policy; covering his long-term care costs entirely.
Common Reason to Pursue a Life Settlement
In terms of consumer value, a life settlement provides seniors with a sensible solution for a policy they may no longer need or can no longer afford. Rather than allowing it to lapse or surrendering it for a small cash surrender value, a life settlement offers you another alternative that often makes more economic sense. There are a plethora of motivating factors that encourage seniors to get rid of their policies.
The three top general reasons are:
- Funds are needed to pay for medical care or some other expense.
- The premiums are no longer affordable.
- Your lifestyle needs have simply changed and the policy is no longer needed.
Qualifying for a Settlement
There are certain specifics for the policy and the health status of the insured that affect eligibility. The following list serves as a “rule-of-thumb” guide and is in no way definitive proof that you will qualify for a life settlement. However, it is a good baseline for your probability of obtaining a substantial settlement.
Typically, the death benefit of a policy must be at least $100,000. The higher the death benefit, the more desirable a policy is and the greater the payout you can receive.
The premium payments must be affordable to the firm purchasing the policy as they will become responsible for them once the change of ownership occurs. This amount varies depending on the firm.
Age & Health Status
The insured usually must be at least 65 years of age or older. The older you are, the higher the evaluation you can expect. If you have a severe medical impairment, you can expect a larger cash value as well. If you are suffering from a terminal illness, this negates the age requirement.
Abacus Settlements has been known to purchase many different types of policies. In the past, we have dealt with universal, whole, term, and group policies. We are one of the leaders in the industry in conducting term transactions.
Several years ago, Abacus noticed that when clients contacted other settlement companies, they would end up waiting days or even weeks just to receive an estimate. It was, and still is in many cases, typical for other life settlement companies to take months from initial contact to get you paid for your policy.
Abacus thought this needed to change. We know that clients need money now, not 60 days from now. We took the initiative to develop a solution in the form of Abacus Express.
By using this unique process, we are able to qualify your case and generate an estimate within 24 hours. Since we are a direct buyer and provider, there are no middle-men and your line of communication is direct to the party purchasing your policy, Abacus.
- Fill out our obligation free One-Step Qualification Form or call us at 1-(800) 561-4148.
- Undergo a 15 minute, over-the-phone medical interview with a professional underwriter.
- If you are happy with your rough estimate, fill out our simple application.
- Abacus will pull all your insurance information and further underwrite your case.
- We will make you an official offer on your policy based on underwriting.
- The offer is accepted and the money is dispersed on the same day.
How Much is My Policy Worth?
This is the most complicated question to answer about life settlements due to the fact that the pricing process relies on each individual’s health status, age, and policy type. The most approximate answer we can give before speaking with you or gathering information is that it is guaranteed to be more than your insurance company would pay in a settlement. Abacus is unique in that we can offer you an estimate much faster than our competitors, typically at the end of a 15-20 minute phone interview.
Different Types of Settlement Companies
If you’re considering a life settlement, it’s important to know the different paths you could take to a settlement.
These are the companies that actually purchase a client’s life insurance. As a direct buyer, Abacus falls into this category. Clients who choose to work only with a provider don’t go through any middle-men and therefore aren’t subjected to any commision charges.
These agents often come from the client’s own insurance company, sometimes they are the same people who sold you the policy in the first place. Agents serve as a client’s advocate and work directly with the providers on the client’s behalf.
Lead Generation Companies
These companies are not actually involved in the settlement process. They simply generate leads and then send them to brokers and providers. If you contact one of these companies, they are not the company who you are actually working with, rather they are simply going to turn your case over to someone else.
These professionals are similar to lead generation companies in that they turn policies over to larger buyers. However, brokers do some of the legal work, like ordering medical records and insurance information, before sending the cases to providers. Brokers typically keep around 20-30% of your settlement value.
At Abacus Life Settlements, our main goal is to be your trusted source of information to help you understand exactly what a life settlement is. We are committed to empowering senior consumers and their financial advisors by offering objective insight to help you make an informed decision regarding your insurance policy.
With Abacus Express, we are able to price policies and distribute funds to clients faster than any other company in the industry. As a provider, we are the top of the latter in the settlement process, meaning that if you go through a broker, agent, or lead generation company, there is a good chance that your policy will come across our desk. Instead of having to pay expensive commission fees and cause yourself unnecessary hassle, we advise you to come directly to us.
Abacus Life Settlements offers your transparency and confidentiality when it comes to your life settlement. We are here to make sure that you get the payout you deserve from your policy.
Life Settlement Facts
- A majority of states heavily regulate life settlement transactions (42 of 50), this ensures total protection of the policyholder at the state and federal level. Government oversight being involved in the industry means that anyone holding a life settlement license is guaranteed to be above board.
- Most types of policies can qualify for a life settlement, including universal life, whole life, variable, and term life.
- While policyholders 65 and over may qualify depending on medical factors and life expectancy, the most common age for most life settlement transactions is over 72 years old.
- Life Settlements have been acknowledged by the United States Supreme Court since 1911.
- Viatical Settlements gained popularity in the 1980’s in response to the AID’s epidemic.
- Senior settlements have become increasingly popular over time, but were created in the mid 90’s.