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 settlement that primarily involve the critically ill. You can read more about life settlements for those suffering from medical conditions on our “Viatical Settlements for Terminal Illness” page.
In terms of a more thorough definition, a life settlement (also referred to as a 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.
Policies are purchased by institutional funding sources through an entity known as a “provider.” Abacus Settlements, a life settlement provider based in Orlando, facilitates 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 Settlements provides the policy owner with a lump sum cash payment, The Institutional investor takes over future premium payments and receives the death benefit when the insured dies.
For more impartial information on the life settlement industry and the Abacus process, check out our recent feature in the New York Times.
Common Reasons for Pursuing a Life Settlement
In terms of consumer value, a life settlement offers seniors a sensible solution for a policy they may no longer need or can no longer afford. Rather than allowing a policy to lapse or surrendering it for a small cash surrender value, a life settlement offers you a practical alternative that makes economic sense. There is a variety of motivating factors for seniors who sell their policies, some of which include the following:
- Financial assistance is needed to pay for medical bills.
- The beneficiary has changed due to divorce or death.
- Premiums are no longer affordable.
- Funds are needed for long-term care.
- A family business is sold or the owner retires and key person insurance is no longer needed.
- Cash is needed to pay off debt.
- Funds are needed for retirement or lifestyle enhancement.
- Gifts to family members or charitable contributions.
Qualifying for a Settlement
In addition to the age and life expectancy of the insured, other factors that help determine the cash payment received in a life settlement include the amount of the death benefit, the future premium payments necessary to keep the policy in-force, compensation paid to brokerage services, the type of policy, and the rating of the insurance carrier. The following list is a sort of “rule-of-thumb” guide to whether or not you or a loved one can qualify for a life settlement.
- Females should be at least 75 years of age.
- Males should be at least 72 years of age.
Average Health – Some Impairments
- Females should be at least 72 years of age.
- Males should be at least 69 years of age.
Below Average Health
- Females should be at least 65 years of age.
- Males should be at least 65 years of age.
Intermediate to Severe Impairments
- Clients can qualify at any age depending on the severity of impairment.
Abacus has a process that unique when compared to every other company in the life settlement industry. We noticed a trend several years ago, clients were contacting life settlement companies and waiting days or weeks before they could even receive an estimate. It was, and still is and many cases, typical for other life settlement companies to take months from initial contact to get you paid for your policy. We find that unacceptable, our clients often need money now; not 60 days from contacting us. Our answer to this industry standard was shattering the standard with Abacus Express.
With Abacus Express we are able to qualify your case and generate an estimate within 24 hours. Since we are a direct buyer and life settlement provider there are no middle-men and your line of communication is direct to the party purchasing your policy, Abacus.
- Contact us at 1-800-561-4148 OR fill out the Abacus One-Step Qualification Form
- Undergo a 15- minute, over-the-phone medical interview with a professional underwriter.
- If you are happy with your estimate, fill out our simple application.
- Abacus pulls insurance information and further underwrites your case.
- We make an offer on your policy based on underwriting.
- The offer is accepted and money is dispersed same day.
How Much is My Policy Worth?
This is by far the most common question we are consistently asked when speaking with a client for the first time. The most approximate answer we can possibly give before speaking or gathering information is that it is guaranteed to be more than your insurance company will offer if you qualify. There are a number of factors involved in pricing a life settlement including the health and age of the insured, as well as the overall costs involved with the policies premiums and cash value. Abacus is unique in the fact that we can offer you an estimate much faster than our competitors, typically at the end of a 15-20 minute phone interview.
Peter needed additional funds to cover the costs involved with long-term care as he recently turned 89 years old. He considered letting his $250,000 policy lapse to cut costs on premiums but contacted Abacus instead. We were able to offer Peter $120,000 for his policy; covering his long-term care costs entirely.
Different Types of Settlement Companies
If you’re considering a life settlement for any reason, it’s important to know the people with whom you’re working.
Providers: These are the companies (like Abacus) that actually purchase a client’s life insurance policy. Therefore, every client who goes through a broker or lead generation company will eventually end up at a provider.
Lead generation companies: These companies are not actually involved in the life settlement process; they simply generate leads and send them to brokers and providers.
Brokers: These professionals are very similar to lead generation companies, except brokers do some of the legwork (e.g., ordering medical records and insurance information) and then send the cases to providers. Brokers typically keep 20-30% of your settlement value.
Agents: These are life insurance agents—often the person who originally sold a policy to the client. Smith says that seniors are often more comfortable working with an agent, who serves as their advocate. Agents work directly with providers on the client’s behalf.
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.
At Abacus Settlements, our goal is to become your trusted source for information about life settlements and to help you understand exactly what a life settlement is. We are committed to empowering senior consumers and their financial advisers with objective insight to help you make an informed decision regarding your life insurance policy.
Abacus Settlements is a life settlement provider, we are ultimately at the top of the ladder in the life settlement industry. Whether you work with an agent, broker, lead generation company, or provider; your case will wind up coming across our desk. Rather than pay expensive broker fees, or risk your life settlement taking longer than it needs to as it changes hands; we encourage clients to come to us directly. We are able to generate offers faster and ensure far more transparency when we have a direct line of contact with you. Saving you an immense amount of time, money, and stress.