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  • What Is the Transaction Process for a Life Insurance Settlement?
  • June 13, 2017
  • Selling one’s life insurance policy for a life settlement is a good decision if the insured has been diagnosed with a terminal illness or their existing policy isn’t performing as expected, and once you’ve decided that selling your life insurance policy for a life settlement is a good idea, you’ll need to go through the transaction process to make it happen.

    The information provided below helps to explain this transaction process.

    Application

    After choosing the proper presentation to settle a policy, the policy owner must fill out an application and provide proper documentation – policy copies and medical records.

    Documentation

    The settlement broker or provider will then review the documents. Settlement companies can work with the advisor or directly with the policy owner.

    Review

    The settlement company submits the medical records for review by an independent life expectancy company, who calculate the probable life expectancy using actuarial and physician experts.

    Analysis

    At this stage, each settlement firm calculates the market value of their portfolio. Other companies may consider different factors. If the policy had no market value, the process ends.

    Offer

    Having determined that the policy has a market value for a settlement, the provider relays the offer to the policyholder. If the offer is declined, the policy owner can seek other offers from other settlement providers.

    If working with a life settlement broker, the broker must seek offers from different providers and present all offers to the seller of the policy.

    Closing Package

    If the policy owner accepts an offer, the provider that made the offer sends a closing package formalizing the transaction. The policy owner must review and sign this package. The funds for settlement transactions are then placed in an escrow account.

    Notification

    When the signed documents are returned, the insurance company is notified of the change of policy ownership to the new owner, the provider.

    Funds Transfer

    Upon written verification of the change of ownership, the escrow agent releases the settlement payment to the seller of the policy.

    The above information regarding transaction process is from the “Life Settlement Basics” publication (2008), according to the “Life Insurance Settlement Association”, which is the trade association for the life settlement industry and associated businesses.


    By Tony Steuer, CLU, LA

    Steuer, author of Questions and Answers on Life Insurance: The Life Insurance Toolbook, has more than 25 years of experience and holds the Department of Insurance Analyst License (LA) as well as the Charted Life Underwriter (CLU) designation. Tony holds various leadership positions and has authored three books on the topic of life insurance.

    Steuer’s work has been awarded the “Excellence in Financial Literacy (EIFLE) Award from the Institute of Financial Literacy for his The Questions and Answers on Disability Insurance Workbook and The Questions and Answers on Insurance Planner. Forbes named Questions and Answers on Life Insurance: The Life Insurance Toolbook as one of their top nine great investment books.

    He’s also the founder of the Insurance Literacy Institute and creator of The Insurance Bill of Rights designed to empower consumers and to identify members of the Insurance Industry dedicated to strong professional standards.


    – Photo by U.S. Army Sgt. 1st Class Jon Soucy

  • Category: Articles Library, Featured Articles, Life Insurance, Life Insurance; Tony Steuer Columns, Tips

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