A life settlement is the technical term for selling your life insurance policy to an investor. Your life insurance is an asset which can be sold just like your house or your car.
In exchange for your life insurance policy, you can receive an immediate cash payment. Users receive an average payout of 22% of policy face amount*, but the actual amount received varies from policy to policy.
Seniors pursue a life settlement for several reasons. One is to fund a better retirement. You can use the cash you receive to live better, get yourself out of debt, buy a nice retirement home or even put your grandchild through college.
A life settlement is a great financial option if you no longer have a need for your life insurance policy. Don't lapse or surrender your policy. If you qualify, Ovid can get you started on the path to sell your policy and receive the fair market value in an upfront payout.
Ask yourself if any of the below situations are true?
Maybe because it's getting too expensive to pay the premiums because the cost is going up, or maybe you have other financial priorities. Many people turn to life settlements to cover their cost of medical expenses.
Perhaps you want a better retirement - you only live once so make sure you live well. Perhaps you need to pay for an upcoming medical expense or other large purchase.
Are your children all grown up and financially independent? Do they still need you to continue to provide the safety net of your life insurance?
In addition, corporate life insurance policies such as key-man policies can also be eligible for life settlements.
A life settlement can take approximately 3-8 weeks in total. Ovid will refer qualified policies to one or more licensed buyers. There is then a diligence period where the provider will inquire about your health. Once an offer is made and you accept, you must transfer ownership and beneficiary of the life insurance policy and the buyer will fund the settlement offer to an escrow account. The purchase price will be released to you upon confirmation of change of ownership and beneficiary by the insurance company.
Ovid makes life settlements accessible to consumers. We ask you several questions up front to determine if you are likely a qualified candidate for a life settlement. If your policy qualifies, we refer you to one or more licensed buyers, who will reach out to you, evaluate your case, and potentially make an offer for your policy.
Here's a helpful infographic on how the transaction works. You can also read more about the process here.
Just because you want to sell your life insurance doesn't mean you necessarily can. The transaction has to be a good deal for the buyer also. For a life settlement to work for the buyer, they need to know that the cost of maintaining the premium payments will be economical until you pass away and they can collect the death benefit. This translated to a few main things:
Your life expectancy is the most important variable in the buyer's equation.
Policies smaller than this are not necessarily worth the cost to transact to the buyer.
Many people want to sell their life insurance when their premium costs begin to skyrocket. The buyer of the policy will have to incur those same premium costs, so they want to make sure that it's affordable for them.
Most types of policies can be eligible for a life settlement, including Universal Life, Whole Life, Term Policies and Variable Policies.
You can learn more about the eligibility factors in our article Am I Eligible for a Life Settlement?
Ask Gary. Gary received $810,000 for his policy.
Gary realized that he was over-insured relative to his financial situation - making it very expensive to keep his Universal Life policy. Instead of lapsing the policy, he learned about life settlements and contacted Ovid.
Ovid referred Gary to a licensed provider who worked directly with Gary and bought his policy for $810,000 in cash.
You will receive this at the time of the sale.
You stop paying premium on the life insurance. The purchaser of the policy will continue to make premium payments directly to the insurance company.
Once the policy is purchased, it belongs to the buyer. Upon the passing away of a policy's underlying insured person, the policy buyer is paid the death benefit by the insurance company.
In 1911, the U.S. Supreme Court declared that your life insurance is your personal property, and that you can assign its ownership at your discretion. This unlocked another option for policyholders - an alternative to lapsing their life insurance. This Supreme Court decision gave policy owners the power of control. Insurance is regulated on a state basis, so depending on the state you live in, there may be different laws surrounding the life settlement transaction. A life settlement transaction is regulated by state insurance departments in 44 states.
Users receive an average payout of 22% of policy face amount.* So for example, a $1 million policy could generate a settlement offer of about $220,000 in cash.
Your offer is calculated primarily based on your age, health, life insurance premium costs, and policy death benefit.