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FAQs

Have Questions? We Have Answers.

What is the secondary market for life insurance?

For more than 20 years, the secondary market for life insurance has provided a trading environment for policy owners to sell unwanted life insurance policies to alternative buyers. The market is comprised of a variety of business entities, including life settlement brokers, providers, investment firms, law firms, medical underwriters, consultants, actuaries, trustees & escrow agents. The secondary market continues to gain traction because it benefits consumers seeking to monetize a static insurance asset, and because it benefits buyers seeking investment returns from a non-correlated asset not tied to the volatility of the stock market.

Why is a life settlement something I should consider for my clients?

Our research shows that Americans age 65 or older leave approximately $112 billion in benefits on the table each year by lapsing or surrendering their life insurance policies. A life settlement is a great option for capturing some of those benefits rather than forfeiting them back to the insurance companies.

Are these transactions legally recognized?

Life insurance has been a core part of the personal finance planning since the 1800s, but many financial advisors and insurance agents are unaware that a senior’s life insurance policy is personal property in every legal sense. The legal basis for life settlements as a legitimate option for life insurance owners can be found in the Grigsby v. Russell decision from the U.S. Supreme Court in 1911, where it ruled that life insurance is just like any private property you own and can therefore be sold.

What are Accelerated Death Benefits?

Accelerated Death Benefits are paid by an insurance company on an existing policy. It is an insurance policy provision that lets you collect part of your death benefit before you die. If you have a terminal illness, the policy advances you a specified part of your death benefit to pay medical bills or other expenses, then the amount is subtracted from the death benefit your beneficiary receives.

What is the cash surrender value of a life insurance policy?

The money given by an insurance company to a policyholder once they choose to terminate their policy is known as the cash surrender value. This value is generally far less than the value the policyholder would have received through a life settlement.

What is the average life settlement payout?

While we estimate that the average universal life insurance policy that was lapsed last year was worth [TBD], every policy is totally different. Each policy has its own individual worth.

How are life settlements taxed?

Life settlements are taxed in three tiers.

  1. Proceeds received up to the tax basis are free of income tax.
  2. Proceeds received that are greater than the tax basis up to the amount of the cash surrender value are taxed at ordinary income rates.
  3. Proceeds received that are in excess of the cash value get taxed as capital gains.
What type of policies can be sold?

Term Policies Still Convertible to Universal Life (If term policies can still be converted into a UL product without any additional underwriting requirements by the life insurance carriers). In most cases, buyers will not consider a non-convertible term life insurance policy for purchase, because of the risk that the insured will outlive the term coverage. A Whole life insurance policy typically has a large amount of cash value built up within the policy, and high required premiums, which make the pricing for a life settlement transaction unattractive. Variable life insurance sold in a life settlement transaction is considered a securities transaction, which limits the number of buyers in today’s marketplace.

For any additional information, call us at 954-500-5433 (LIFE), or email us at Info@HiddenGem-FL.com
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954-500-5433 (LIFE)

Info@HiddenGem-FL.com

4000 Hollywood Blvd.
Suite 520N Hollywood, FL 33021

 

Hidden Gem Life Solutions (“Hidden Gem”) may purchase policies in the following states that do not regulate the secondary market for life insurance: Alabama, Dist. of Columbia, Michigan, Missouri, New Mexico, South Carolina, South Dakota, and Wyoming. In all other states, Hidden Gem purchases life settlements via affiliated state licensed life settlement providers.

This website is only intended for residents of those states where Hidden Gem IS AUTHORIZED TO purchase life insurance policies in the secondary market. Nothing contained on this site is meant as legal, tax or financial advice. Any user wishing to conduct a life settlement transaction should seek such advice from an independent professional adviser. Void outside the United States and where otherwise prohibited by law.

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