Frequently Asked Questions
What is a life settlement?
A life settlement is the sale of a life insurance policy for an amount greater than the cash surrender value but less than the amount of the death benefit. Life settlements have sometimes been called viatical settlements.
Who can sell the life insurance policy?
The policy owner (who may also be the insured) is the only one who has the legal right to sell the policy. In most cases, the cooperation of the insured is also necessary in order to complete the transaction.
Who is eligible for a life settlement?
Generally, you may be a candidate for a life settlement if:
- The insured is at least 65 years of age
- The face amount of the policy is no less than $250,000
- The average life expectancy of the insured is between 24 and 168 months
- The insured's health should be somewhat impaired
- The policy is beyond the two-year contestability period and is transferable
- The policy type is universal, convertible term, survivorship, or whole life
- The policy was issued by a U.S. life insurance company
What kind of cash can I expect to receive in a life settlement?
While every life settlement is different, depending on the policy and the circumstance of the policy owner and the insured, cash from a life insurance settlement can range from 10% to 40% of the policy's face value. This is often much more than the cash surrender value of the policy.
In what states does CharlesEdwards operate?
CharlesEdwards is currently permitted to operate in over 20 states across the country. As new licenses activate and new legislation is enacted, the specific states and total number will change. We represent clients residing only in states we are allowed to transact life settlements.
How does the life settlement process work?
Most life settlement brokers or buyers will ask you to complete an application. You will provide medical and insurance release forms so that they can gather information from your life insurance company and your doctors. All information gathered is confidential and not to be provided to anyone without your written approval. If you qualify, the buyer will make you an offer for your Policy.
What factors go into the offer that I will receive?
The gross offer for your policy is based upon facts such as how long you are expected to live, the amount you pay for premiums, the rating of your insurance company, and your policy’s provisions. The net offer depends upon the commission and fees charged by your life settlement broker.
Is there a difference between a life settlement broker and a buyer representative?
Yes. Although both a life settlement broker and buyer representative will help you with the sale of your policy, there are important differences between them. A life settlement broker, such as CharlesEdwards, works for you. On your behalf, CharlesEdwards submits your policy proposal to multiple buyers to find the best offer for you.
A buyer’s representative works only for the buyer and will only provide you an offer of what that buyer is willing to pay. The offer may not be the best offer for you or the highest return on your investment.
Do all life settlement brokers charge the same commission?
No. Some brokers charge a commission based upon the face value of the policy (sometimes as high as 6-8%). Others charge as much as 40% of the gross offer received. In fact, not all brokers will show you the gross offer, but instead only show you what is left after they have taken an undisclosed amount of commission.
How does CharlesEdwards differ from other life settlement brokers?
CharlesEdwards operates as follow:
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We disclose every gross offer to you, the commissions and fees on every offer, and the net amount that you will receive. Our commissions are only calculated on the net value created through the sale of your life insurance policy. In other words, we take the gross offer and subtract any cash surrender value you could have obtained on your own. It is only to that figure that we calculate our percentage commission.
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All commissions and fees are disclosed to our clients in writing before we begin representation. Never any surprises or hidden charges.
If I enter a life settlement contract, when will I get my cash and who pays me?
You will receive your funds either directly from the buyer or from an escrow agent. The date that you will receive this money varies. Times typically range from three to seven business days after the insurance company has confirmed the completed transfer of ownership.
What if I change my mind?
If you change your mind about selling your policy, you can cancel the life settlement contract at any time up to the end of the rescission period. Some states have a rescission period of three days, while others usually have a 15 to 30 day rescission period.
What if I die shortly after selling my policy?
If you die during the rescission period, the life settlement contract will automatically cancel.
What happens after I get my money?
Once you have sold your policy, all policy rights and obligations transfer to the buyer. You are no longer responsible for paying premiums and are free to use the cash proceeds from the sale however you desire. After the sale, the buyer may begin calling on the health status of the insured.
What if I don’t want to be contacted about my health status?
If you do not want to be contacted about your health status, you may appoint an adult person or persons to be contacted on your behalf. That person must be in regular contact with you.
How will I know who will be calling me about my health status and how often?
The buyer must give you the name, address, and phone number of the person who will be contacting you or your contact person(s) about your health status and the frequency that they will be calling.
Are there other options available besides selling my policy?
Your insurance company may offer options, such as accelerated death benefits, loans, and surrender of the policy for its cash value. If you are concerned about other options, you may want to contact your insurance agent or financial advisor to see what options are available.
Can a life settlement affect public assistance I may be receiving?
Receipt of a life settlement may affect your eligibility for public assistance programs such as medical assistance (Medicaid), Aid to Families with Dependent Children (AFDC), supplementary social security income (SSI), and drug assistance programs.
If you are concerned about how a life settlement payment will affect you, your family, and your spouse’s eligibility for public assistance, contact your social service agency before entering into the life settlement process.
What are the tax implications of a life settlement?
The IRS issued Revenue Ruling 2009-13 providing guidance on the tax treatment afforded life settlement proceeds. Dependent upon the type of policy and the policy owner's tax basis, proceeds received from a life settlement may be partially or wholly exempt, partially taxable, or wholly taxable. Taxable portions of a life settlement may be taxed at ordinary or capital gain rates.
In the event a policy owner is a trust or corporation, proceeds may roll into a replacement policy without triggering a taxable event. This practice is referred to as a 1035 exchange.
This information is not tax guidance. As with any tax-related issue, CharlesEdwards advises you to consult your professional tax advisor.
What if I want to obtain another policy after I sell my current policy?
An insured’s health condition may have changed since the first policy’s issuance date. Consequently, there is no guarantee the insured will be able to obtain a new policy or one of acceptable terms. Should the insured desire to maintain a life policy of some denomination, the insured should notify the policy owner and then proceed in obtaining the new policy before entering into the life settlement transaction.
How do I start the process of selling my life insurance policy?
It's easy! Just Contact a CharlesEdwards representative at 800.492.5186 or email us your contact information and we will contact you immediately. The entire process is conducted over the phone and overnight courier. No representative will ever need to visit your home.
