Frequently Asked Questions About Life Settlements
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Here are answers to some of the most commonly asked questions about life settlements.
Many seniors are paying premiums on life insurance policies they no longer need or want while expenses associated with retirement continue to increase. If your life insurance policy no longer serves its intended purpose, or if your premiums are too expensive to maintain, you may want to consider a life settlement to convert your policy to cash.
Fill out the simple form to determine if a life settlement might be a good fit for you. If the results are favorable, an Advanco Life Settlement representative will direct you through the next steps to assess your specific situation.
The Life Settlement process takes approximately 6-8 weeks. The process of obtaining ones’ medical records is the most time consuming part of the process.
As part of the life settlement process, each applicant is required to complete a medical questionnaire and a health interview and grants Advanco permission to access medical records for an accurate assessment of their life expectancy.
- Universal Life Insurance (UL Policies)
- Whole Life Insurance
- Term Variable
- Joint
- Key Man
- Group
The funds are yours, so you can see them as you see fit. Many people use the proceeds from a life settlement to pay for long-term care costs, general healthcare costs and retirement expenses.
The value of a life insurance policy is determined by five main factors:
- Policy Type: The type of life insurance policy you hold.
- Policy Face Value: The death benefit amount specified in your policy.
- Age: Your age at the time of the settlement.
- Health Status: Your current health condition.
- Policy Ownership Duration: A minimum of two years of ownership of your life insurance policy.
Settlement companies evaluate these factors individually to generate an offer tailored to each policy. After assessing all these factors, an offer is formulated.
There are no hidden fees or charges in working with Advano Life Settlements. Your only expense will be for independent legal advice in reviewing the agreement, as required by state law (if applicable).
Yes. Under United States Supreme Court precedents, a life insurance policy is considered your personal property. Like any other tangible or intangible personal property, you can sell it, trade it, or give it away. Advanco Life Settlements strictly adheres to all state and federal regulations.
Advanco Life Settlements is a settlement broker, not a provider. Advanco Life Settlement’s ONLY interests is in helping qualified Seniors get the most money for their life insurance policy. Advanco Life Settlements DOES have direct relationships with credible life settlement providers that will purchase qualified life insurance policies.
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- 1.877.840.4880
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How Does the Life Settlement Process Work?
Application: Start by filling out an online application here or call to speak with one of our life settlement specialists at 1-877-840-4880 to get started.
Documentation: Advanco Life Settlements will acquire your basic health and life insurance policy information using the provided medical release forms. A doctor’s appointment may be required to obtain a medical release form.
Review: Once all required information is gathered, Advanco Life Settlements will review your policy information. Our investor will then decide whether or not to make an offer. This process is completed on an individual basis, as each case is unique.
Offer: If an offer is made, it will be communicated to the policyholder or advisor (your broker or insurance agent) as applicable.
Closing Package: If an offer is accepted, a closing package will be put together. Each life settlement closing package varies by state. The most common documents in a closing package include a letter of competency (LOC), verification of coverage (VOC), life settlement contract, life expectancy reports, change of ownership form (COO), and a change of beneficiary form (COB). We will explain everything to you every step of the way.
Funds Transfer: Once the closing package is completed and the change of ownership documents have been verified, your life insurance policy will be owned by investors. This means that the policy owner no longer needs to worry about paying premiums, and your funds will be on their way. Funds can be released through a single direct deposit or a check at closing.
What Are the Different Life Settlement Options?
Traditional
The traditional option involves selling your entire life insurance policy for a lump sum that exceeds the policy’s surrender value.
You will no longer have any responsibilities or claims to the policy, and all future premiums will be covered by the buyer.
- Lump Sum Payment
- No Future Premiums
Retained Benefit
The retained benefit option allows you to stop paying premiums while retaining a portion of the policy’s benefits.
When the policy matures, your beneficiaries will receive a guaranteed percentage of the benefit, with no further obligations or payments required from you.
- Guaranteed Benefit Percentage
- No Future Premiums
- Lump Sum Payment
- No Future Premiums
Hybrid
The hybrid option combines elements of both traditional and retained benefit options, where you sell a part of your life insurance policy.
This option provides you with an immediate cash payment, ensures your beneficiaries receive a guaranteed percentage of the benefit when the policy matures, and removes your obligation to pay future premiums.
- Guaranteed Benefit Percentage
- Immediate Cash Payment
- No Future Premiums
Will I Pay Taxes on My Life Settlement?
While many life settlements do not result in taxable income, there may be some tax liability (you should always check with a tax advisor). Advanco Life Settlements recommends that you consult your tax advisor before completing a transaction, as new IRS laws are always pending.
Life settlements are subject to taxation in three distinct ways:
- The portion of the settlement up to the tax basis is not subject to income tax.
- Any amount received that exceeds the tax basis but is less than the policy’s cash surrender value is taxed at ordinary income rates.
- Proceeds that surpass the cash surrender value of the policy are taxed as capital gains.
To determine the taxable amount, subtract the total premiums paid (your tax basis) from the settlement amount.
Regarding death benefit proceeds received by beneficiaries:
- The proceeds due to the insured person’s death are not included in the beneficiary’s gross income and do not need to be reported. However, any interest earned on these proceeds is taxable and should be reported as interest received.
For more details on the taxation of life insurance proceeds, consult the IRS.
