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LIFE SETTLEMENT FAQ

A life insurance policy is a contract between an insurance company and a policy owner. In exchange for premium payments, an insurance company provides a lump-sum beneficiary payout (also known as face value) to the policy owner’s beneficiaries after he or she passes away. 

A life settlement is the sale of a policy owner’s life insurance to a third party in exchange for a lump-sum cash payment. The new policy owner will assume responsibility for any future premiums and will be eligible to receive the beneficiary payout from the insurance company.

Life settlements are regulated at the state and federal level. Currently, 43 states regulate life settlements, covering over 90% of the US population.

At Sequoia Settlements, we guide you in selling your life insurance from beginning to end, ensuring that you get the best payout for your policy. 

Typically, an investor will be the purchaser of your policy.  The investor may use a life settlement provider to execute the transaction.

A life settlement provider represents the investor, and will often act as a buyer on their behalf. A provider’s goal is to purchase your policy at the lowest possible price. 

A life settlement broker represents you, the policy owner, directly, and has a fiduciary responsibility to procure the best possible deal for you by presenting your policy to as many buyers as possible. 

We will help you access multiple life settlement providers in order to receive the best payout.

Cash surrender value is the amount of money a policyholder would receive by the insurance company if the policy is voluntarily terminated before its maturity. It equals the cash value of a policy (the savings component included in some life insurance policies) minus insurance costs and other fees.

Individuals choose to sell their life insurance because: – They no longer require life insurance. – They require cash in order to invest in another opportunity. – They can no longer afford the premiums. – They are facing financial hardships, including major health expenses, and need to access funds. – They are unable to offset the costs of long-term care insurance, or require an alternative to a long-term care rider on life insurance.

Life settlement taxation works in three tiers. The amount paid into the policy (called the tax basis) is tax-free. Earnings above the tax basis, but under the cash surrender value, are taxed at ordinary income rates. Any remaining revenue is subject to capital gains tax. 

Consult a financial advisor to understand any tax ramifications you might have.

Several factors can influence the value of your policy, including: 
-Your age and health
-The type of life insurance policy you own
-The face value amount of your life insurance policy
-Your premium costs
Most people who qualify meet the following criteria are:
– Over the age of 65 or under the age of 65 with a significant health issue
– Active policy holders, with a beneficiary payout of at least $100,000

Although universal life policies and term life policies are the most-purchased policies from life insurance companies for seniors, all types of insurance policies may qualify. 

On average, a life settlement transaction takes 2-4 months to complete.  

Once your policy is sold and you receive the agreed payout, all rights, ownership, and payment responsibilities are transferred to the new owner.

No. You can sell a portion of your policy, pay off your premiums, and still maintain important beneficiary benefits for your loved ones.

Yes. The timeframe for changing your mind (also known as rescission) varies by state. A typical rescission period is 30 calendar days from a fully executed settlement contract, or 15 calendar days after you receive your settlement funds.

Read more in our blog post below

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