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Frequently Asked Questions
- What Are Life Insurance Policy Put Options?
- Can I sell a life insurance policy that has no cash value in a life settlement?
- How does an accelerated death benefit differ from a viatical or life settlement?
- What is the difference between a policy loan and premium financing?
- What is a senior settlement?
- What is Viatical fraud?
- What do viatical settlement companies do?
- What is a viatical settlement broker?
- What is a Life Expectancy Certificate?
- What type of obligation do I have after I sell my policy?
- Can I sell my variable life insurance policy through www.AmritaFinancial.com?
- What is a life settlement broker?
- What is permanent life insurance?
- What is term life insurance?
- What is a life settlement?
- What is a "life insurance settlement"?
- What is a viatical?
- How much does it cost to do a life insurance settlement?
- What is "cash surrender value"?
- My life insurance policy has a "cash value", what is that?
- Who is responsible for obtaining the medical records?
- What if I die immediately following the sale of my policy?
- What if I change my mind and want to cancel a life settlement after I have received the money?
- Am I obligated to accept the offer from an institutional buyer?
- Life settlement taxation?
- Who will pay the remaining premiums after I sell the policy?
- How do I know I am receiving the highest value (offer) for my policy?
- How much money can I expect to receive for the sale of my policy?
- What if I still need life insurance coverage?
- What are the most common ways to use the life settlement proceeds?
- Is a medical exam required for a life settlement?
- Can I appraise my life insurance policy even if I do not want to sell it now?
- What type of life insurance policies qualify?
- What are some of the reasons to do a life settlement?
A Policy Put Option, ("PPO") allows a life insurance policy owner to purchase the option or right to sell their life insurance policy at a predetermined price, on a predetermined date.
Yes. Life insurance policies do not need to have cash value to be eligible for a life settlement.
An accelerated death benefit allows a portion of the death benefit to be paid from the insurance company to the insured. This option, which is not available in all life policies, would offer a partial payment when the insured has a terminal illness or severe medical condition. After the insured dies the remaining death benefit will be paid to the beneficiaries. A viatical or life settlement is a one time sale of the life insurance policy to a 3rd party buyer.
Premium financing is a loan to a policy seller from a 3rd party company to pay the ongoing insurance policy premiums. While a life insurance policy loan is money that is borrowed by a policy owner FROM the cash value accumulated in a life insurance policy.
Many seniors are finding that a senior life settlement offers them the opportunity to sell their unwanted life insurance policies for more money than they would be able to receive by surrendering the policy to their insurance company. Senior life settlements, also known as life settlements through Amrita Financial put the policy holder in direct control of who they sell their policy to and how much money they receive for it instead of relying on insurance brokers or policy auction sites.
Viatical Fraud committed by a few has unfortunately given the viatical and life settlement industry a big black eye. Much legislation and discussion has been devoted to the topic of viatical fraud. As a result, the incidence of viatical settlement fraud has diminished tremendously, but people should always be aware.
Viatical Settlement Companies defined
Viatical settlement companies are defined by some states as: A viatical or life settlement provider is defined as a person, other than a viator, life settlor, or owner of an individual policy or certificate holder under a group policy insuring the life of a viator or life settlor, who enters into a viatical or life settlement with a viator or life settlor and owner or certificate holder, or who attempts to do so through negotiation, solicitation, or acquisition of confidential information from or about a viator, life settlor, or owner. What that means is Viatical companies are for profit organizations that purchase life insurance policies that insure terminally ill people. Viatical settlement companies benefit the policy seller, who is typically the same person as the insured, by providing immediate cash before the insured dies. Viatical settlement companies in turn profit by receiving the full death benefit of the life insurance policy when the insured eventually dies. Why would a viatical settlement company buy an existing life insurance policy? The viatical company agrees to pay the insured a lump sum and pay the ongoing life insurance premiums to keep the policy in force. The viatical company will make a profit if the amount they spend to buy the policy plus the ongoing premium expense is less than the death benefit of the life insurance policy. Essentially viatical companies are investing money into a life insurance policy at a discount. Then the viatical settlement companies realize a profit when the policy matures or pays the death benefit. To the viatical company it is a smart business investment. To the insured that gets paid by the viatical settlement company it is a much needed financial life line. Viatical settlement companies help insured when they desperately need it most.
A Viatical settlement broker is someone who negotiates a viatical settlement on behalf of a life insurance policy owner. Viatical brokers work with a number of viatical providers, which is another term for the financial institutions that buy these policies, to find the best price for their client’s insurance policy. Viatical brokers essentially facilitate the sale of an existing life insurance policy which is insuring someone who is terminally ill. Some states provide the following definition of a viatical broker: A viatical broker is defined as person who is not a viatical or life settlement provider representative, and who for a commission or other form of compensation, or with the intent of obtaining such compensation.
Life expectancy certificates are reports generated by 3rd party actuarial and underwriting service providers. These reports or certificates are used by potential life settlement buyers to evaluate the expected longevity of an insured. Amrita Financial may use life expectancy certificates by life expectancy providers such as 21st Services, Examination Management Systems Inc. (EMSI), AVS or Fasano Associates.
After a life insurance policy is sold in a life settlement, there are few further obligations on the selling side. Of course, the buyer assumes the insurance premiums. However the buyer will periodically check on the health of the insured. This usually occurs 2 to 4 times a year. Some states have laws that limit the amount an insured may be contacted after a life settlement.
Variable life insurance policies can not be sold through Amrita Financial at this time. Please continue to check back as we are continuously upgrading our system.
A life settlement broker is someone who represents a viator, also known as a policy seller or life settlor, in a life settlement transaction. A life settlement broker is a fiduciary representative of the policy owner who negotiates with buyers to achieve the highest life settlement possible. Some states, define a life settlement broker as: As person who is not a viatical or life settlement provider representative, and who for a commission or other form of compensation, or with the intent of obtaining such compensation.
Permanent life insurance provides ongoing life insurance coverage regardless of how long the policy has been in force. Unlike term policies, permanent insurance will stay in force as long as the premiums are paid and the insured is alive***. A permanent insurance policy will not stop providing insurance after a set amount of time like a term life insurance policy. Examples of permanent insurance are Universal life, Whole life and variable policies. Often permanent policies can accumulate cash value in the policy which can be used by insureds for loans or to even pay some of the premium responsibilities.
***Endowment whole life policies pay the death benefit to an insured that reaches age 100.
Term life insurance is life insurance for a set amount of time. The coverage ends on a specific date which is specified in the policy. For example, term life insurance policies are often purchased for 15, 20 or 30 year terms. When that term is finished the policy no longer provides life insurance coverage. In some cases, the policies may have a provision allowing them, for a fee, to be converted to permanent life insurance.
A life settlement occurs when someone sells an existing life insurance to another party for an immediate lump sum payment. The buyer then assumes the premium payments and receives the policy benefit when the insured dies. Some states define it legally as: A transaction whereby a life settlement provider acquires a policy insuring the life of an individual who does not have a catastrophic or life-threatening illness or condition by paying the owner or certificate holder compensation or anything of value that is less than the net death benefit of the policy.
A "life insurance settlement" is another name for a life settlement.
The common viatical definition is; the sale of an existing life insurance policy that is insuring a terminally ill person in exchange for an immediate cash payment. Typically a viatical definition is predicated upon the health of an insured. The health of the insured determines if the sale of a life insurance policy is called a life settlement or meets the viatical definition. When referring to an accepted viatical definition, the person insured by the policy must be terminally ill. The viatical definition gained traction in the 1980’s. It was then that AIDS patients sought money for medical and living expenses. They sold their life insurance policies to investors. The AIDS patients were happy to get much needed money, while the investors viewed the arrangement as a low risk investment in which they would get paid upon the insured’s death. With that the viatical industry and viatical definition as we now know them were born.
People selling an insurance policy should not incur any out of pocket expenses. The administrative costs associated with a life settlement transaction are paid for by the life insurance policy buyer, life settlement broker or Amrita Financial. Policy buyers pay Amrita Financial a commission for transacting the sale of a life insurance policy.
Cash surrender value is the amount that an insurance company will pay a policy owner to surrender or turn in their unwanted life insurance policy. Cash surrender value of life insurance is essentially the amount an insurer will pay for someone to “walk away from a life insurance policy" they own and discontinue their insurance. This is an important concept to understand as it is one of the 3 options available to someone who no longer wants their life insurance policy.
The amount that is available in cash for loans, withdrawls and/or premium payments. Accessing cash value may reduce the death benefit and may increase the risk of lapse. Withdrawals may be subject to surrender charges and could have a permanent effect on the cash value. Loans reduce the cash value and death benefit by the amount of the loan outstanding plus interest. If the policy is surrendered, the cash surrender value is paid to the policy owner.
A life settlement can not occur without providing medical records for the insured. This information is used by potential buyers to evaluate the life settlement opportunity and make purchase offers for a life insurance policy. Amrita Financial uses its proprietary software to obtain medical records on behalf of the insured. All we need is the health care providers' names, telephone & fax numbers and our system automatically requests the records.
If an insured dies within 15 days of receiving the life settlement proceeds, the life settlement transaction is automatically canceled. The buyer of the policy will forward the entire amount of the life insurance policy benefit, minus the amount that has already been paid to the seller in the life settlement transaction and the cost associated with paying any premiums since the transaction was completed.
The "cooling off period" varies from state to state, but typically buyers have 30 days or in some cases 15 days to change their mind after receiving the money. If a buyer does change their mind, they must of course return the money received in the life settlement and reimburse the buyer for any premiums paid.
No! Policy holders are in no way obligated to accept any offers from potential buyers.
Life settlement taxation differs depending upon the type of policy and if there is a cash value component to the policy. For Term policies the total amount of premiums paid minus the cost of insurance (amount required to keep the policy in force) is tax free in a life settlement. Life settlement taxation above the total amount of premiums paid occurs as capital gains. Life settlement taxation of Whole life or Universal Life Policies also treats the portion of premiums paid above the cost of insurance as tax free.
The buyer of your life insurance policy will continue to pay the insurance premiums. Once the policy has been transferred, the seller of the life insurance policy does not have ANY responsibility to pay the ongoing premiums.
Policy sellers see all life settlement bids, all the time and are free to choose the one they feel is best. 100% transparency in the life settlement process provides confidence that a policy seller is getting the best value for their policy. Amrita Financial strives to engage with the highest number of institutional buyers in the life settlement market. We enable consumers to see all bidders, each respective bid amount and potential commission refund available.
The amount of money offered by a life settlement provider for the purchase of a life insurance policy is affected by a number of factors. Some of these factors include the age of the insured, the specific type of life insurance policy, cost of future premiums, health status of the insured, the insurance company underwriting the policy, market forces among buyers and sellers and the negotiations performed by the life settlement broker on behalf of the policy seller. On average, life settlements generate 8 times (800%) more than the cash surrender value of the life insurance policy.
Life settlement proceeds can be used to purchase other life insurance products including paid up life policies. Almost 1/2 of policies more than 2 years old can be replaced with the same coverage for a lesser premium. Life insurance rates have been decreasing as a result of increasing life expectancies and insurance industry competition. Using the proceeds from a life settlement can often replace coverage with reduced or even paid in full future premiums.
The proceeds from a life insurance settlement are unrestricted by nature and at the sole discretion of the individual, group or trust that sold the policy. Some of the more common uses for the proceeds are debt reduction, invest money elsewhere, buy other insurance products including other paid up life insurance policies, fund long term care services or long term care insurance, fund retirement, purchase a house, purchase an annuity, etc.
No medical exam is required. However, medical records will be evaluated and factored into the bids you receive. All information will be kept strictly confidential in compliance with the Health Insurance Portability & Accountability Act of 1996 (HIPPA).
Yes. Simply use our policy appraisal tool to see a potential settlement amount, number of interested buyers and projected cash refund. You can use it without registering and it is free!
- Minimum age of insured: 65 years old for healthy insureds or any age for terminally ill insureds
- Minimum life insurance policy size: $50,000
- Life insurance policy must be beyond contestability period
- Policy types: Universal Life, Whole Life, Variable Universal Life, Term & Convertible Term policies, Group policies and COLI (Corporate Owned Life Insurance)
- Insurance carrier rating: USA based carrier with B+ or better rating from S&P (or comparable)
- Second to die policies are eligible.
- Personal Reasons:
- Fund retirement
- Debt reduction
- Eliminate insurance premiums
- Buy long term care insurance
- Charitable contributions
- Use proceeds for other investments
- Medical Expenses
- Bankruptcy - liquidation of assets
- Over insured
- Bridge periods of lost income
- Pay for new home or dream vacation
- Purchase long term care services
- Higher quality of life
- Estate Planning:
- Insured outlives heirs
- Change in estate size means current policy not appropriate
- Proceeds from life settlement used to buy new paid up policy
- Changes in estate tax laws no longer necessitate policy
- Pay gift taxes on current transfer of estate
- Create financial planning flexibility from dormant asset
- Current policy is underperforming
- Business & Professional:
- Business sale
- Buy/sell agreement dissolved
- Policy performance is below expectation
- Executive leaving
- A "key man" policy is no longer needed or required for loan
- Deferred compensation payout requires policy liquidation