What is a life settlement? What you need to know before selling your life insurance policy | Sponsored Features

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By Darin Duin, Certified Estate Planner/Special for TR Estate Planning

A Denver business co-owner has taken early retirement due to health issues.

The company had purchased a $1 million term policy and upon the co-owner’s retirement, was simply going to terminate the policy as he was no longer the owner.

Instead, they were alerted by the concept of life tenure and decided to go through a process of evaluating the policy to see if there was any value.






Darin Duin


  • Insured: Male, 68 years old
  • Policy type: $1 million, 20-year level term
  • Cash value: $0
  • Full Settlement Offer: $180,000

Currently, I have access to over 25 funds that will buy life insurance policies for more than the current cash value. In total, 8 funds have made offers on this file, with an initial offer of $70,000.

It is critical in the life settlement industry to be able to provide competition or multiple backers to create auction type auctions and ultimately preserve that highest possible bid for our client . By simply adding multiple bidders to the process, we were able to increase the price and achieve a phenomenal result for our client.

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This story is not unique – there are many examples highlighting how life settlements work for different families with the right counselors in place.

Life insurance policies are a necessary and valuable planning tool. Policies are purchased to provide financial stability when it is needed most.

But, over time, things can change. Lifetime settlements can put money back into the hands of policyholders, allowing them to spend those funds on more pressing financial priorities.







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LANE HICKENBOTTOM / OMAHA HEADSHOT CO.


How Life Settlements Work

I still remember sitting in our boardroom in the spring of 2004, waiting for a wholesaler from a life insurance provider. This was nothing new, as wholesalers of all kinds visited our office frequently. At that time, I had no idea what a rule of life was. There were other councilors at the meeting, and I doubt I was the only one in the dark.

Now, 18 years later, if there is no life insurance, I probably won’t participate.

So what is a settlement of life?

The concept is very simple: if you have a life insurance policy and for some reason that policy is no longer wanted, needed, or simply unaffordable, there are alternative strategies to simple lapse, surrender or cancellation of your policy without further value.

When a policy is no longer needed, desired or affordable, policyholders do not have to give up years of premiums. Selling a policy can reveal significant hidden value. Selling can generate much-needed cash, help fund long-term health care, supplement retirement, or simply discover “found money.”

Selling a life insurance policy is not like selling other types of assets. Buyers are represented by a team of analysts and years of experience.

You deserve the same kind of dedicated expertise to tip the scales in your favor. Our proprietary process provides transparent, unbiased and personalized service to achieve maximum value and deliver a superior customer experience.







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LANE HICKENBOTTOM / OMAHA HEADSHOT CO.


Key Points About Life Regulations

1. Each year, more than $112 billion in insured capital is lapsed or surrendered by insureds over the age of 65. In a survey conducted by the Life Insurance Settlement Association, 90% of respondents wished they had known that selling their policy was an option before lapse or abandonment of their policy.

2. According to the National Association of Insurance Commissioners, most settlement funds are used to fund long-term care costs.

3. Anyone wishing to sell their policy must be at least 65 years old, except in extenuating health circumstances. Essentially, it’s the reverse of when you buy a life insurance policy.

4. A viaticum payment concerns an insured person who is terminally ill or whose life expectancy is less than 2 years. A lifetime settlement will usually be between 2 and 18 years.

5. All potential policies must have been in force for two years (after the contestability clause).

6. Insureds do not take exams as they would for new insurance. All life expectancies are calculated from existing medical records.

7. A change in health from the time the policy was issued is best to generate the most interest in the secondary market.

8. On average, crates will sell for six to eight times the current cash value.

9. The case processing time is usually about 60 days.

10. All temporary fonts should always have conversion options available.

Nebraska’s only certified real estate planner, Darin Duin has handled over 5,000 cases in 31 states and helped hundreds of business leaders create a plan for their financial legacy. Learn more about estate planning and living settlements at www.trestateplanning.com.

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