Life Settlement Q&A - BC Brokerage
We had the pleasure of sitting down with Ezra and Geoffrey of Genesis Asset Advisors out of St. Louis, MO, to learn more about Life Settlements. We go through the who, what, when, where, and why of life settlements! Take a look to learn more.
What is a life settlement in its most basic form?
A life settlement is the sale of one’s existing life policy for an amount that is greater than the cash surrender value but less than the death benefit as an alternative to lapsing or surrendering it back to the insurance carriers.
Who would benefit from selling their policy?
A policy owner that no longer has a need for or can no longer afford their insurance; the liquidity provided to them in a life settlement transaction can have a major impact on their retirement and overall financial plan.
Who are the typical people looking to sell their policy?
Any life insurance policy owner. Whether it be Trust, Corporate, Non-profit, or individually owned life insurance; typically, insuring those over the age of 70. However, If there are health impairments than the younger age range can work as well. What does the process entail? For the policy owner and insured it is as easy as filling out an application and we take care of the rest, i.e., medical records, carrier items, and life expectancies.
How do I get the best deal / most money for my policy?
This is a great question. Using a broker instead of a provider is your best bet. Brokers have a fiduciary obligation to their clients while providers are looking to offer the lowest price to provide a greater return for their investors.
When I receive the life settlement proceeds, how is it taxed?
We are not accountants and we cannot give tax advice; however, as a general guideline everything up to cost bases, i.e., premiums paid into the policy, is tax free. Usually (but not always) the rest is taxed at long term capital gains rates.
How can an advisor bring this conversation up with their client? How do you fact find?
One of the beautiful things about a life settlement is that they usually come across your desk during a routine policy review. A few more ways it could come up is when an advisor receives a grace notice that a client stopped making premium payments on a policy, their term policy is about to expire and they do not plan on converting it, or a client expressed concern on the need and price of an existing policy, these are all potential ways to segway into a conversation about a life settlement.
What types of policies? Term? Perm? Whole Life, IUL? Term if its convertible, VULs, IULs, GULs, Survivorship and Whole Life. What if it already has loans / its underfunded?
In short, yes, a policy can be sold even with an existing loan; however, if a policy is underfunded then the client might be looking into alternative solutions to paying a much higher required annual premium; a life settlement might just be such a solution.
Can I get a quote before I apply?
Not a reliable one. Do not fall for the old “get a quote today” shtick. A life settlement requires a case by case analysis and the necessary underwriting is also required on each case, in order for it to be a reliable quote.
What do I need to do to get started?
By filling out our fast and simple questionnaire we can determine if a life settlement might be a potential solution that is worth pursuing.
Give us a call for any other questions! 765.730.7146
As independent insurance fiduciaries, BC Brokerage focuses on helping their clients protect their financial livelihoods. The BC Brokerage team brings experience and expertise in life, disability, annuity, and long term care insurance solutions. Broc Buckles and Peter C. Ciravolo are dedicated to their mission of providing their clients with the best service and products available on the market today.