What Is the Transaction Process for a Life Insurance Settlement? - LifeQuotes.com

What Is the Process for a Life Insurance Settlement?

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, CPFFE

Tony Steuer is an author and advocate for financial preparedness. Tony Steuer, CLU, LA, CPFFE, helps people make sense of the financial world in a way that’s easy for them to understand. His books including, “GET READY!,” “Insurance Made Easy,” and “Questions and Answers on Life Insurance,” have won numerous awards. Tony is the founder of the GET READY! Initiative which includes the GET READY! financial organization system, the GET READY! Financial Preparedness Club, GET READY! Podcast, and the GET READY! Financial Principles, a best practices playbook for the financial services industry. Tony served as long-term member of the California Department of Insurance Curriculum Board. Tony is regularly featured in the media including the New York Times, the Washington Post, Fast Company, and other media. He has also appeared as a guest on television shows, such as ABC’s “Seven on Your Side.” Visit https://tonysteuer.com/ to join the GET READY! Financial Preparedness Club and access free resources.

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