LIFE SETTLEMENTS MOST FREQUENTLY ASKED QUESTIONS

Welcome members of AMVETS. Below is a summary of frequently asked questions with answers to assist you in understanding what a life settlement is.

What is a life settlement?

A life settlement is the sale of an unneeded, ineffective life insurance policy that would have otherwise been surrendered or lapsed.

Why and when would a life settlement be right for a client?

The reason a policy was once purchased may no longer be valid such as:

• changes in the client’s estate reduce/eliminate the need for insurance
• the client has outlived the intended beneficiary(ies)
• premiums have become too expensive
• the client’s needs have changed and would require a different type of policy (i.e., annuity or long-term care)

 Or in the case of businesses:

• buy-sell policies for cases in which the owners have retired or the business is sold
• deferred compensation plans when the executive has left the company
• key person policies, after the insured has retired
• policies purchased to cover loans that have since been paid off

Who is eligible for a life settlement?

• anyone over the age of 65 (in some cases 60)
• a policy with a face amount of $50,000 or more
• a policy that is assignable and outside of the contestable period

What type of life insurance policy is eligible for a life settlement?

Virtually any type of individual life insurance may be (including Convertible Term, Whole, Universal, Variable, Survivorship, Adjustable and Joint First-to-Die policies).

Policies can be individually owned or owned by trusts, foundations, not-for-profit organizations or businesses.

What can a client do with the money from a settlement?

Frankly, anything they want. It is their money to use how they see fit. As their trusted broker or advisor, you should evaluate their needs and suggest the appropriate way to invest the proceeds. Perhaps a long-term care policy or annuity is the right choice for their changing needs.

Is my client still responsible for paying premiums after the policy is sold?  If not, who is?

No, your client is no longer responsible for paying premiums. Once the policy is sold (and your client is no longer the policy owner), all premium payments and obligations are the duty of the purchaser (the life settlement company). 

Is my client still able to determine who the beneficiary is after the policy is sold?  If not, who is?

Upon completion of a life settlement, If an event of a death of insured, then your client’s beneficiary will no longer receive a death benefit.  The purchaser of the policy will determine the beneficiary.

What are the tax implications of selling a life insurance policy?

There can be tax implications to a life settlement. We strongly encourage you to advise your clients to discuss such implications with their personal attorney, financial planner or tax advisor to look at the specific benefits and effects on their tax liability. The proceeds from a life settlement may be taxable depending on the tax basis of the policy, the case surrender value and the amount received from the life settlement. If the settlement amount is less than the tax basis, there should not be a tax liability.

What does the process consist of and how do I get started?

As a broker, your first step in offering this exciting new financial planning tool to is to be as educated and savvy as possible. Aquarius Life Solutions would welcome the opportunity to discuss and share our knowledge with you. Next, you may want to (re)evaluate your clients' financial, retirement, health and future needs. Until now, you may never have known the alternative to an unwanted, unneeded and costly insurance policy. Now you are able to offer such a solution to your clients.

Our process is simple, seamless and quick. For the broker, it is as easy and effortless as offering this option to your client and having them agree to consider and evaluate an offer. No obligation to you or your client. Once the process is under way, it takes only a couple of weeks to complete—from filling out a short application, gathering secondary information (existing medical records), evaluating the policy and receiving multiple offers!

Please also note, assuming up-to-date medical records exist, your client will NEVER be asked to undergo any type of medical exam or physical.

Remember, Aquarius Life Solutions is working for you. Our loyalty remains on the side of our brokers and their clients throughout the entire process. Our responsibility is to secure you the best possible offer available.

What if we have additional questions?

For additional questions or information, please contact Aquarius Life Solutions at 914-933-0063 or 914-925-0222, or alternatively email us at infoforamvets@aquariuslife.com. For additional information, please see our website at www.aquariuslife.com/amvets.

We have also included several articles published with the Society of Actuaries on our website to assist you in further understanding life settlements.