Before anyone can sell a life insurance policy in a life settlement, several conditions must be met. The seller of the policy must always be the owner, but not necessarily be the insured party. Oftentimes the insured and the policy owner are the same person, but not always. For instance, a wife may own a whole life insurance policy on her husband. When the insured is not the owner of the policy, the insured must cooperate and agree with the policy owner in order to successfully complete the transaction. In simple terms, a Life Insurance Settlementa.k.a. senior life settlementis the sale of an in-force life insurance policy by its owner to an investor or investment group. For a sale to occur a policy must be considered a good investment opportunity. There must be a market for it, just as there is a market for other assets such as stocks or real estate. If an investor does not think that a policy will deliver an adequate return they will not want to buy a life insurance policy. You should know that not all policies are attractive to investors. Term life policies are rarely bought by investors. Investors are generally interested in Universal Life, Whole Life or Convertible Term policies. These policies can be on one life or two lives. A lot of investors are interested in policies with large face values. A senior with a Universal Life policy for over $1M is more likely to find investor interest in a Life Settlement than a senior with a policy worth less than $1M. The importance of age in a Life Settlement To investors, age of the insured is one of the most important variables in the valuation of a policy. Investors will generally only buy policies with an insured life expectancy of 15 - 18 years or less. The insured in most Life Settlements have a life expectancy between 7 12 years. A life insurance policy sale is commonly known as a Senior Life Settlement because the insureds are usually over 70 years old. Some seniors in their 60s can make a feasible Life Settlement, but this is usually because they have a reduced life expectancy due to an existing physical condition. It is of utmost importance to obtain the services of an experienced Life Settlement company that can accurately appraise the value of a Life Insurance policy. The life settlement broker is the one responsible for negotiating the deal with investors. They will compile all the information needed such as life expectancy reports and create a valuation. After that, they may offer the case to as many as 25 -30 investors. Investors that purchase Life Settlements Major Wall Street institutions are among the investors who buy Life Settlements. Institutional buyers will generally only consider policies beyond the two-year contestability period. It is important to know that Life insurance companies may contest a policy or death benefit payment if they have reason to suspect a policy was fraudulently obtained. It is considered Life Insurance fraud by life insurance companies if a policy is bought for the purpose of reselling it. After the two-year period is complete a life insurance company will generally not contest a policy and will pay the benefit. An experienced life settlement broker may be able to provide options to seniors who have policies that are less than two years old. Have your life settlement broker explain all the many different options that may affect your decision. Once you know all your options, then you can be sure youre making the right decision. While some policies may be more attractive to investors, there is no maximum or minimum size of policy required to qualify for a life settlement. Some investors favor larger policies, while others prefer to purchase a number of smaller policies. Policies of $10 Million or more are regularly sold to investors. The average size policy in a Life Settlement has a death benefit in the neighborhood of $2,000,000, but policies as small as $250 thousand are often sold also. The best way to assure life settlement success is to select an experienced and skilled life settlement company that has a history of delivering successful settlements.
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