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What is a Life Settlement?

What is a Life Settlement?

A life settlement refers to the sale of an existing insurance policy to a third party for a one-time cash payment. Payment is more than the surrender value, but less than the actual death benefit. After the sale, the purchaser becomes the policy’s beneficiary and assumes payment of its premiums. By doing so, the buyer receives the death benefit when the insured dies.

How to Sell Your Life Insurance Policy?

You can sell your life insurance policy to a person or an entity other than the company that issued the policy. There are many life settlement companies buying life insurance policies.

When to Sell Your Life Insurance Policy?

The popular reasons for selling life insurance includes:

  • Retirement
  • Unaffordable premiums
  • Emergency use of cash
  • The original reason for buying a life insurance no longer exists

What are the Concerns about Selling Your Life Insurance Policy?

  • Anything that will affect the life settlement amount you receive
    • Your life expectancy
    • The type of policy you have (term policy or permanent policy)
    • Any unscrupulous life settlement buyers
  • Commission fees charged by the brokerage:

Sometimes it can be as high as 30% of the amount you get

  • Tax obligations
  • The public assistance benefits you are currently receiving, such as Medicaid
  • Privacy concerns:
    • You have to share your medical history over again to the policy buyer
  • Transparency and accountability of brokers

Who Buys Life Insurance Policies?

  • Institutional investors such as mutual funds, pension funds
    • Life settlement providers pack the policies and resell to institutional investors. They have to be licensed.

Do You Need an Advisor or Broker to sell your life insurance policy?

You don’t have to work with a broker, but it is recommended that you use a broker to negotiate with a buyer. A good advisor or broker who knows many life settlement providers is usually able to negotiate a competitive value and bidding process for you. However, if you choose to execute the deal that they facilitate for you, you have to pay a commission fee. The commission fee can be high.

How much can you expect to get paid for your life insurance policy?

As the policyholder, you may be able to receive 10% to 35% of the amount that would be paid out when you die. A number of factors will influence the cash value of your life insurance policy, including:

  • The death benefit value of the policy
  • Your age
  • The cost and the remaining time you’ll pay premiums

We can’t provide a definitive answer to that question without specific information from the insured. Typically, you can expect to receive about 20%-25% of your policy benefit upfront, in cash. The amount of money the seller gets should be more than the cash surrender value of the policy and will be less than the death benefit value of the policy.

What are the benefits of selling your life insurance policy?

Many elderly Americans discover that their personal or financial circumstances have changed over the years. The original reason for buying a life insurance policy no longer exists. A life insurance settlement can provide immediate liquidity for an unwanted or out-of-date policy.

What is the process of selling your life insurance policy?

Selling life insurance is part of a regulated industry. Even though you could try to find a buyer on your own, it is recommended you work with professionals. Consider working with:

  • A professional advisor
  • A life settlement broker who can represent you, provide you with counsel, and search settlement providers for buyers on your behalf
  • A life settlement provider

Once you have a potential buyer, you’ll need to have the following information:

  • The type of life insurance policy you have—if you have term life insurance, you may also want to find out if you can convert it to a universal life or whole life policy
  • Personal information such as medical history and health information
  • The cash surrender value of the policy
  • How many years premiums will have to be paid for

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Ariel Tavor

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Ariel Tavor is the Founder and Principal Managing Director of Lions Financial. His agenda for Lions Financial is to provide his clients a service that maintains the highest professional value. Specializing in the Business-to-Business market has allowed proficient expertise in providing ongoing consulting services in the focus areas of business advisory, capital markets, and risk management. Ariel works with CEO’s, Capital Investment funds, and Boards of Directors where he advises his clients in matters of Executive compensation, Business Plan Design, Mergers & Acquisitions, Due Diligence, and Asset Financing.

Ariel has 10 years of experience in the financial services industry. He has worked in insurance and investment companies to analyze client’s financial and make suggestions on allocations based on defined objectives as well as maintaining long term relationships. Ariel’s comprehensive experience has allowed him to work closely with CEOs of companies and their executive teams from diverse industries such as trucking, hospitality, commercial real estate, Insurance, manufacturing, and technology. He has helped lead companies through the challenging decisions around – Buy-Sell Agreements, Deferred Compensation, Employee Group Benefits, Succession Planning, Mergers and Acquisitions, Valuations, and Business Sales.

Ariel currently oversees their family office investment group and sits on the Board of Directors of several companies and real estate developments. Their Investment group controls a portfolio of companies in multiple industries. They collaboratively have holdings in companies specialized in – Automotive Distribution- Real Estate Asset Management- Corporate Travel- Ink Mailing Manufacturing, E-Commerce, Financial Services, Management Consulting, Enterprise Technology, and Food Concepts. In recent years there has been a transition into fund allocation towards limited partnership investments in Venture Capital, Private Equity, and REITS within individual underwriting opportunities.

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Ariel Tavor is the founder and principal managing director of Lions Assurance Financial. His agenda for Lions Assurance Financial is to provide his clients a service that maintains the highest professional value. Specializing in the business-to-business market has allowed proficient expertise in providing ongoing consulting services in the focus areas of business advisory, capital markets, and risk management.

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Lions Assurance Financial is a highly successful, independent business consulting and wealth management advisory firm that focuses on three key areas of the financial industry: business advisory, capital markets, and risk management. The experienced team at Lions Assurance Financial focuses on serving the business and wealth management needs of privately owned business generating 3-50 million in revenue including independent business owners, family owned businesses, and business partners. Lions Assurance Financial works with capital providers including investment banks, private equity firms, venture capital firms, capital advisory firms, accredited investor platforms, commercial banks, and speciality finance firms.​

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What is the fundamental difference between a buoyant company and a not-so-good one, when all the factors are the same?
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An effective risk management consultant will help individuals and organizations evaluate their risks and develop a plan to counter their losses. Risk management is a complex process, and there is no one-size-fits-all process that all consultants can use. However, there are certain conventional methods that a consultant will use to help you protect your organization from risk. A risk management consultant should be capable of identifying the unique risk that your business is exposed to and carefully evaluating the scenarios. One of the most critical steps in the risk management step is to discover and list all the expected and unexpected risks. There are various advisory firms that can help you mitigate risk and take care of your business’s financial aspect, but one firm that stands out from the rest is Lions Financial. The company is an independent financial services & business advisory firm based in New York. In conversation with Ariel Tavor, Managing Director of Lions Financial. Lions Assurance Financial is a highly successful, independent business consulting and wealth management advisory firm that focuses on three key areas of the financial industry: business advisory, capital markets, and risk management. The experienced team at Lions Assurance Financial focuses on serving the business and wealth management needs of privately owned business generating 3-50 million in revenue including independent business owners, family-owned businesses and business partners. Lions Assurance Financial works with capital providers including investment banks, private equity firms, venture capital firms, capital advisory firms, accredited investor platforms, commercial banks, and specialty finance firms.