Life Settlement FAQs
Jump ahead to any question:
- 1. What is a life settlement*?
- 2. What are some of the reasons why I might consider the sale of my policy?
- 3. Do I have to sell my entire policy?
- 4. Who pays the policy premiums after I've completed a life settlement transaction?
- 5. How much money will I receive if I sell my life insurance policy?
- 6. What is the difference between cash value and cash surrender value?
- 7. Does my state regulate life settlements?
- 8. What types of life insurance policies can be sold?
- 9. After I sell my policy, are there any restrictions on how I use the money?
- 10. Are the proceeds of a life settlement taxable?
- 11. What happens to the policy after I sell it?
- 12. Who buys life insurance policies?
- 13. Why should I use a broker instead of going directly to a provider?
- 14. Do I need a medical exam?
- 15. Are there any costs or fees to sell my policy?
- 16. What if I pass away right after selling my policy?
- 17. Is the process confidential?
- 1. What is a life settlement? [Back to Index]
A life settlement is the sale of an existing life insurance policy for more than its cash surrender value but less than its death benefit.
- 2. What are some of the reasons why I might consider the sale of my policy?
[Back to Index]
- Premium payments have become unaffordable
- Considering lapse or surrender of the policy
- The policy is no longer needed or wanted
- To pay for healthcare costs
- To help fund retirement
- Change in estate planning needs
- 3. Do I have to sell my entire policy? [Back to Index]
No. A portion of your policy can be sold with the remaining death benefit left to the original beneficiary.
- 4. Who pays the policy premiums after I've completed a life settlement transaction? [Back to Index]
Once you've completed your life settlement contract, and the ownership of the policy has been transferred, you will no longer have to worry about paying the premiums - that will be the responsibility of the new policy owner.
- 5. How much money will I receive if I sell my life insurance policy? [Back to Index]
The value of a life insurance policy is determined by a number of factors, including but not limited to:
- Your age
- Your medical condition
- Type of insurance policy
- Face amount of policy
- Amount of premium payments required to keep the life insurance policy in force.
Use our Life Settlement Calculator to get an idea of how much you could receive.
- 6. What is the difference between cash value and cash surrender value? [Back to Index]
Cash value can also be referred to on the annual report from your carrier as "Accumulated Value," "Policy Value," or "Account Value." This is the additional amount over the cost of insurance that you've paid into your policy over time. Cash surrender value is calculated by subtracting from the policy's cash value any applicable surrender fees, which can be substantial.
- 7. Does my state regulate life settlements? [Back to Index]
While not all states regulate life settlement transactions, that is rapidly changing as life settlements grow in popularity. You can see which states are regulated with this Life Settlement Regulation Map.
- 8. What types of life insurance policies can be sold? [Back to Index]
Most types of life insurance policies can qualify, however, the most common are universal life, whole life, and convertible term.
- 9. After I sell my policy, are there any restrictions on how I can use the money? [Back to Index]
No, there are no restrictions on use of the funds - the money is yours to spend as you like.
- 10. Are the proceeds of a life settlement taxable? [Back to Index]
The tax treatment is somewhat complex; see our Tax Implications page for details and please consult your tax advisor for additional information.
- 11. What happens to the policy after I sell it? [Back to Index]
All rights and obligations of the policy are transferred to the new owner. You will no longer be responsible for making premium payments on the policy, the new owner will. The new owner will name a new beneficiary of the policy who will collect the proceeds upon the insured's passing. With respect to policies containing a provision for double or additional indemnity for accidental death, the additional payment must remain payable to the beneficiary last named prior to entering into a settlement contract, or to such other beneficiary, other than a settlement provider, as you may designate, or in the absence of a beneficiary, to the policy owner's estate.
- 12. Who buys life insurance policies? [Back to Index]
Golden Gateway Financial, a broker, helps consumers sell policies to life settlement providersi who purchase many policies that they in turn sell in bundles to Wall Street investors. By using a broker, such as Golden Gateway Financial, consumers put life settlement providers in competition.
- 13. Why should I use a broker instead of going directly to a provider? [Back to Index]
Working with a broker will help you maximize the settlement. There is a wide disparity in the bids that a single life insurance policy can receive. If you go to just one provider, you'll only receive their bid, and won't know if you could have gotten more from someone else. When dealing with a broker, the providers know that they are in competition for your policy and may bid higher, resulting in more money for your policy.
- 14. Do I need a medical exam? [Back to Index]
No. We will work with your doctors to collect your medical history (similar to the process at the initiation of life insurance), but you do not have to have a new medical exam performed.
- 15. Are there any costs or fees to sell my policy? [Back to Index]
The application process is free of charge. If you accept an offer, Golden Gateway Financial will charge a commission fee which we will disclose to you before your policy is sold.
- 16. What if I pass away right after selling my policy? [Back to Index]
If you pass away within the first 15 to 30 days (the timeframe varies depending on your state of residence) after you receive the money from the provider, the settlement contract will automatically cancel. The provider will pay the owner of your policy or beneficiaries designated by the owner, minus any money it already paid for the purchase of your policy and any premiums it paid to the insurance company to keep your policy current.
- 17. Is the process confidential? [Back to Index]
Yes. All Golden Gateway personnel are guided by the highest standard of confidentiality. No medical, financial, or other personal information about the seller and/or the insured will be disclosed to any other person or entity not a part of the process with Golden Gateway without the seller's and /or insured's specific written consent, unless required by law. For more details, please see our privacy policy.
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