Life Settlement Providers

What is a life settlement provider?

Life settlement providers are a unique type of licensed, life settlement company that buy senior citizens or terminally ill patients out of their existing life insurance policies for a lump sum cash settlement. Conversely, people sell their life insurance policies before they pass away to a life settlement provider for cash upfront.

Providers represent the secondary life insurance market. Think of them like the Fannie Mae of life insurance. Since a life insurance policy can be legally and safely sold in America, life settlement providers exist to counter life insurance carriers.

There are two types of life settlement providers and

Similar to banks, life settlement providers serve as the funding sources for life settlement transactions. While direct buyers of life insurance policies are regulated, they are not fiduciaries and may not always act in the policy owner’s best interest. Direct buyers may offer a faster sale process than brokers, but sellers should be aware of the risks of not receiving a fair market value for their policy. It’s important to note that the time it takes to complete a single application for one offer from a direct buyer may be the same amount of time it takes to gather multiple offers from a life settlement broker whose duty is the policy owner to ensure they receive the highest offer. Therefore, policy owners should consider working with a reputable broker to ensure they receive the highest value for their policy.

*This is not financial advice. Consult a licensed viatical settlement broker, provider, tax, or financial professional.

Everyone’s situation is a bit different and there is no guarantee you can sell your policy. Here’s a roadmap to help you navigate different sections of this page;

Eligibility

How do you qualify for a viatical settlement? The criteria is pretty basic but you would need to speak with a viatical broker just like any other health and life insurance product to get a free appraisal for your situation. Here’s a general guideline;

  1. Must have proven terminal or chronic illness
  2. Policies must be at least 2 years old
  3. The face value or death benefit is generally above $100,000
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If you think you may qualify for a viatical settlement, the next steps would be to provide authorizations to start the underwriting process. Your viatical broker helps facilitate your auction application. Here are the signatures required;
  1. HIPPA: Allow access to 3 years of medical history.
  2. Life Release: Allow carriers to provide policy copy and illustrations.
  3. Disclosure: Agreement to terms of service.
  4. Closing Documents: If an offer is accepted.
Viatical Settlements Defined

Viatical Pros & Cons

Selling a policy is a big decision that should not be taken lightly. It’s important to weigh the benefits with the costs to determine if a viatical can help you.

PROS

  • Help cover medical or end-of-life expenses.
  • Improve the quality of life for yourself and others.
  • Keep the original intent of the policy.
  • Pocket future premiums.
  • Possible tax-favored benefits for end-of-life and long-term care rollover.

CONS

  • Beneficiaries will not receive the full death benefit.
  • Possible Medicaid ineligibility.
  • Your creditors can claim proceeds.
  • The process takes time & paperwork.

Weigh Your Options

Is a viatical settlement your best option? It should not be a hasty decision. Here are some reasons why people sell their life insurance policy & alternative options to consider;
  • Keep the policy.
  • Check if your policy has Accelerated Death Benefits (ADB).
  • Consider a policy loan if possible.
A cancer patient laying down with viatical company logo

Choosing the Best Viatical Settlement Company for You

Selecting a top viatical settlement company is crucial to getting the best offer for your life insurance policy. Make sure you are working with a licensed, reputable viatical company. Here are the types of viatical companies you should know exist;

VIATICAL PROVIDERS

Providers are specialty licensed viatical companies who ultimately purchase your life insurance policy. They are the ones making the offers. They represent multiple funds owned by institutional investors. They buy large portfolios and are not considered with any one policy. Providers are NOT fiduciaries and their goal is profitability. It is not in the consumer’s best interest to work directly with a viatical settlement provider! However, providers are the trusted source of liquidity and are held to a high ethical standard.

Top Viatical Providers

  • Coventry & Coventry Direct
  • Abacus Life


VIATICAL SETTLEMENT BROKERS

Unlike providers, viatical brokers are licensed agents who have a legally bound fiduciary duty to their client’s best interest. Think of a viatical broker like a real estate agent. Brokers are paid a fee to represent the seller and list the policy at auction among the top providers competing to buy a policy thus creating fair market value. The goal is to negotiate multiple offers increasing the payout amount and exceeding their commission. Viatical brokers have been known to charge excess fees so make sure they can justify the cost accordingly.

Top Viatical Settlement Brokers

  • Bridge
  • American Life Fund
  • Life Insurance Settlements


VIATICAL MARKETING COMPANIES

There are lots of marketing companies posing as top viatical settlement companies but are not licensed and often serve providers to generate customers. Do your research and ask if they are a licensed entity.

Understanding the Process & Taxes

As mentioned, viatical settlement transactions are similar to real estate or selling a home. The average policy sale can take 3-6 months to close before proceeds are paid out. Tax to your tax & financial advisor to plan the proceeds appropriately. Assuming you’re eligible and have an idea of what viatical company you want to work with, here is a process outline and some tax considerations;

VIATICAL SALES PROCESS

  1. Application
  2. Offer(s)
  3. Closing
  4. Transfer Funds

VIATICAL TAX CONSIDERATIONS

  1. You’re typically not taxed on the amount you paid into the policy called your cost basis (see examples below)
  2. Viaticals are considered tax-free for terminal illnesses and/if rolled into a long-term care or other medically necessary vehicles
  3. Not tax advice: Check with your tax professional, state and federal tax offices.

Real Life Examples

Better understand how viaticals work with these case studies;

MEET JIM

Jim was 58 when he was diagnosed with renal kidney disease. The best hospital for him was out of state, he was self-employed and the costs incurred made him contemplate selling his family home. After doing a bit of research on illness financial options, Jim learned about viaticals and realized he had a renewable term policy for $250,000. He contacted a viatical settlement broker who was able to help Jim successfully sell his policy for $50,000 to help cover costs and keep his home.

MEET JILL

Jill was a stay-at-home mom with a husband and three children when she found out she was diagnosed with a life-threatening cancer. Jill had a $300,000 whole-life policy with only $20,000 in cash value. She was able to sell her policy for $160,000 and spend her final days enjoying her family like never before.

“Never lose infinite hope”

– Martin Luther King, Jr.

FAQ’s

Who benefits from a viatical settlement?

Those who benefit from a viatical settlement include the seller of the policy, the viatical broker & the buyer of the policy called a provider (investor).

Who buys viatical settlements?

Those who buy viatical settlements are investors called providers who are specialty regulated life insurance companies who buy the policies from the insured.

What is the purpose of a viatical settlement?
The purpose of a viatical settlement is to provide the seller with financial relief and the buyer with profit.
How much do viatical settlements pay?
Viaticals can pay 20-80% of the death benefit or 5 times the surrender value on average (LISA).

Additional Resources

Viatical settlements are a safe option for anyone under the age of 65 or over looking to get money out to their existing policy to help cover the things that matter most. Although a viatical is not for everyone, it’s important to consider all your options to get the help you need. If you have any questions regarding the resources below contact one of our licensed viatical settlement agents.

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Viatical Links

Compare Life Settlement Providers

Similar to banks, life settlement providers serve as the funding sources for life settlement transactions. While direct buyers of life insurance policies are regulated, they are not fiduciaries and may not always act in the policy owner’s best interest. Direct buyers may offer a faster sale process than brokers, but sellers should be aware of the risks of not receiving a fair market value for their policy. It’s important to note that the time it takes to complete a single application for one offer from a direct buyer may be the same amount of time it takes to gather multiple offers from a life settlement broker whose duty is the policy owner to ensure they receive the highest offer. Therefore, policy owners should consider working with a reputable broker to ensure they receive the highest value for their policy.

Coventry
abacus life
Life Equity
MapleLife
Settlement group
Birkshire
LifeRoc
Institutional Life
Montage
Magna
lifetrust
Q
Habersham
life capital
Fairmarket
Life policy traders
lighthouse
Seven Hills
senior Settlements
SLG
In conclusion, when it comes to selling your life insurance policy, working with a reputable life settlement broker can make all the difference. While direct buyers may offer a faster sale process, sellers run the risk of not receiving fair market value for their policy. On the other hand, life settlement brokers act as fiduciaries, representing the best interest of the policy owner and handling all paperwork to ensure a streamlined process. Moreover, brokers can gather multiple offers, allowing policy owners to select the highest value for their policy. At Bridge, we compare life settlement providers, brokers, and marketing organizations to secure the best offer for our clients. Contact us today to learn more about how we can help you get the most value out of your life insurance policy.

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