What are Life Settlements? Is it Legal to Sell a Life Insurance Policy? Find Out About Life Settlements

Regal Settlement Group LLC
Your Partner in Life Settlements

FAQ's

> Why would someone sell their life insurance policy?
> What are Life Settlements?
> Is the process confidential?
> How long does it take to complete a life settlement transaction from start to finish?
> Are there any restrictions as to how the funds are to be used?
> Are the proceeds from a life settlement taxable?
> What if I change my mind?
> What if I die shortly after selling my policy?
> Are there any medical exams or application costs?
> Does my state regulate Life Settlements?
> How do I know if my policy will qualify?
> Does Life Settlement utilize any institutional funding?
> What is the difference between a Life Settlement and a Viatical?
> Is it really legal to sell and buy someone else's Life Insurance policy?
> Is there a difference between a broker and a provider representative?

Q: What are Life Settlements?
A: A life settlement is the sale of an in-force life insurance policy to a third party. The owner of the life insurance policy is able to get cash for their policy (which is more than the cash surrender value and less than the face amount of the policy).

The cash amount the insured receives is determined by the insured's life expectancy and the associated cost of premiums to keep the policy in force for that time period. This figure represents the present day value of the policy and consequently the monetary offer to the insured.
The buyer in this transaction becomes the new owner and/or beneficiary of the life insurance policy, pays all future premiums and collects the entire death benefit when the insured dies.

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Q: How long does it take to complete a life insurance settlement transaction from start to finish?
A: Our goal is to complete most transactions within 3 months after receiving all documents. We need to carefully review and evaluate the insured's medical records. Sometimes obtaining these records may take some time to accomplish and can slow down the transaction process. Life settlements do take some time to complete and it can be longer than 3 months.

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Q: Are the proceeds from a life settlement taxable?
A: The proceeds from a life settlement are generally tax free up to the amount of premiums paid for the policy. The difference between that amount and the cash surrender value is generally taxable as ordinary income. Amounts received in excess of cash surrender value are generally taxed as capital gain. Consult your tax advisor before completing a transaction as new IRS laws are pending.

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Q: What if I die shortly after selling my policy?
A: If you die at any time up to the 15th day after you receive the money from the provider, the settlement contract will automatically cancel. The provider will pay the owner of your policy or beneficiaries designated by the owner in the life settlement contract any proceeds it receives from your policy, minus any money it already paid for the purchase of your policy and any premiums it paid to the insurance company to keep your policy current. The insurance company or the provider should refund any unearned premiums paid.

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Q: Does my state regulate Life Settlements?
A: Life Settlements are regulated by most state insurance departments. Some states have enacted statutes addressing the sale of all life insurance policies. Other states have laws that only regulate the sale of life insurance policies insuring individuals with a life expectancy of less than 36 months. Still others do not regulate the transaction at all. Of those states that regulate the transaction, most require the broker and provider to be licensed.

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Q: How do I know if my life insurance policy will qualify?
A: Most types of individual life insurance policies qualify for a life settlement as long as they are at least $100,000 in face value and are at least two years old. We will work with virtually every policy type including term, whole, universal, variable, or joint survivorship. Policies may be owned individually, or through corporations, foundations, trusts, non-profit organizations or businesses. In some states, under certain circumstances, a policy less than two years may qualify for settlement.

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Q: Does Life Settlement utilize any institutional funding?
A: Our Life Settlement policy buyers and affiliates are backed by institutions such as banks, reinsurance companies, mutual funds and other financial companies. Each Provider has qualifications or parameters they factor when reviewing a policy. If the policy does not fall within their parameters, the policy is declined. If the policy falls within purchase parameters, an offer is presented to the client.

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Q: Why would someone sell their life insurance policy?
A: There are many reasons why policy holders choose life settlement. Some of the more common are listed below:
• As part of a change in estate planning or investment objectives.
• To pay for healthcare costs for you or someone in your family.
• To fund a more cost effective life insurance policy. One out of every three settlements results in the insured creating a new life insurance policy.
• Premium payments are no longer affordable, or have become excessive.
• An alternative to surrendering the policy.
• To provide a cash gift to family members, or to a charity.

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Q: Is there a difference between a broker and a provider representative?
A: Yes. Although both a broker and a provider representative will help you with the sale of your policy, there are important differences between them. A broker works for you. A broker will check with several providers to find the best offer for you. A provider representative works for a provider. A provider representative will only check with the provider that he or she works with to get you their offer. If you use someone to help with the sale of your policy, you may want to ask whether they are a broker or a provider representative.