Commonly Asked Questions

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At its core, a life settlement refers to a financial arrangement wherein an existing life insurance policy is transferred to a licensed life settlements buyer. This transfer occurs at a value surpassing its cash surrender amount yet falling short of its designated death benefit.

During this process, the policy owner effectively relinquishes ownership and beneficiary privileges to an institutional investment fund. In return, the insured party receives a substantial lump-sum cash payment, often ranging between 4 to 6 times the initial cash surrender value, in exchange for the transfer of ownership rights.

This newfound capital is entirely at the discretion of the policy seller, empowering them to allocate it according to their preferences. 

Additionally, life settlements can also manifest in the form of a paid-up death benefit, providing further flexibility and financial security.

Discover the Impact of Pivotal: Empowering Clients with 6 Times the Policy's Surrender Value on Average. Explore Further Details Here.

Understanding the Motivation Behind Selling Life Insurance for a Life Settlement

In the face of escalating healthcare expenses, burgeoning long-term care outlays, and the ever-increasing cost of living, retirees often find themselves seeking additional financial resources. Below are some of the key reasons driving individuals to consider the sale of their life insurance policies:

Relief From Unmanageable Premium Payments

Fluctuations in the insurance landscape or subpar policy performance may escalate premium costs. Sudden financial challenges like unforeseen medical bills, legal matters, assisted living expenses, or tax obligations can also arise. A life settlement offers a route to eliminate future premium obligations.

Funding Required for Medical Expenses or Significant Costs 

In the face of economic shifts or adversity, selling a policy becomes a viable means to recapture accrued equity and finance substantial expenditures. Notable examples include supporting assisted living arrangements, covering cancer treatments, medical bills, or premiums for other existing policies. Opting for a life settlement unlocks resources to address these financial demands.

Seizing New Opportunities By Reinvesting Built Equity

Recouping the funds contributed to a life insurance policy over time can pave the way for strategic reinvestment. Whether channeling capital into a business venture, property acquisition, debt repayment, tax liability settlement, income-generating annuity purchase, or capitalizing on alternate prospects, a life settlement offers a pathway to realizing these aspirations. This approach leverages the accumulated policy equity to better align with current circumstances and objectives.

Transitions in Life Circumstances

The evolving stages of life often prompt reconsideration of life insurance needs. As cited by Fidelity Investments, a 65-year-old couple entering retirement today may require $285,000 exclusively for healthcare expenditures. Changes such as divorce, retirement, alleviated estate tax burdens, or beneficiaries no longer reliant on policy benefits can drive the decision to sell a policy.

Supplemental Retirement Income

According to USAToday, the cost of a comfortable retirement spans from approximately $858,000 to $1.5 million. Unveiling newfound potential, the sale of a policy empowers retirees to allocate funds as they see fit. Whether for enriching travel experiences, property acquisition, or other retirement-enhancing pursuits, a life settlement broadens horizons.

Ensuring Long-Term Care Financial Support

Amid escalating long-term care expenses, particularly within assisted living facilities, a life settlement emerges as a solution to alleviate housing-related financial concerns. By embracing a settlement, individuals secure the monetary means required to maintain a comfortable standard of living, unburdened by apprehensions about long-term care affordability.

A viatical settlement is a specific type of life settlement involving individuals suffering from a terminal illness. The transaction is usually made tax-free by the IRS, as long as the insured meets specific criteria stated by a medical professional.

A viatical settlement is a legal and viable option for individuals suffering from a terminal illness to sell their life insurance policy for an amount that is more than the cash surrender value but less than the claim amount.

In exchange for transferring ownership, the insured receives a cash settlement that can often be four times greater than the cash surrender value.

A viatical settlement is not a loan; it is a one-time cash transaction that results in a complete transfer of ownership in exchange for a lump sum. The money belongs entirely to the policy seller and can be spent at his or her discretion. Viatical settlements can also be in the form of a paid-up death benefit.

TERMS TO KNOW:

Life Settlement – Transferring a life insurance policy from a policyholder to a third-party buyer for a cash payout.

Cash Surrender Value – The amount of money a policyholder receives if they cancel a policy. The total amount received is the policy’s cash value minus fees associated with policy cancellation.

Death Benefit – The money a beneficiary (or beneficiaries) receives upon the death of the person insured on the policy.

Death Benefit – The money a beneficiary (or beneficiaries) receives upon the death of the person insured on the policy.

 A retained death benefit (RDB) presents a life settlement alternative that empowers a policy owner (seller) to preserve a segment of their life insurance policy's death benefit, designated for a chosen beneficiary. 

This stands as an alternative to solely receiving a lump-sum cash settlement, which is the conventional life settlement approach.

Pivotal Life Capital goes beyond being merely a life settlement company. We engage with each client on an individual level to offer choices tailored to their unique circumstances. Alongside settlement alternatives, we proudly provide retained death benefit (RDB) options. This proves beneficial for individuals seeking to eliminate high premium payments while retaining a portion of their life insurance coverage. 

Feel free to contact the Pivotal team at (XXX) XXX-XXXX; we're enthusiastic about delving into the details further with you!

Cash Surrender Value – The amount of money a policyholder receives if they cancel a policy. The total amount received is the policy’s cash value minus fees associated with policy cancellation.

The three primary life insurance policy categories encompass universal, whole life, and term life insurance.

Universal Life - Universal life insurance offers a blend of permanent coverage and investment savings potential, accompanied by affordable premiums similar to term life insurance. Most universal life policies provide flexibility in premium payments, with options for single or fixed premiums.

Whole Life - Whole life insurance ensures coverage for the insured's entire life span. Beyond the death benefit, it includes a savings component leading to cash value accumulation. These policies are often referred to as traditional or permanent life insurance.

Term Life - Term life insurance, also referred to as pure life insurance, guarantees a specified death benefit if the insured person passes away during a predefined term. Once the term concludes, the policyholder can renew it, convert it to permanent coverage, or allow it to lapse.

An array of universal, whole, and term life insurance options exists, each catering to different coverage needs, premium budgeting, investment preferences, and more.

For comprehensive insights into various life insurance types, explore our Life Settlement Blog.

A life insurance policy "illustration" is a comprehensive set of forecasts meticulously prepared by the actuarial division of the insurance company. This tool visualizes the policy's anticipated performance over its entire duration, offering financial forecasts for each year. 

For term policies, projections encompass the policy term's conclusion. Meanwhile, permanent life insurance policies extend their projections well into the future, often surpassing the individual's 100th birthday.

Typically, an illustration displays both the present and maximum annual premiums, cumulative premiums paid up to that point, and the death benefits for each year. 

In instances where your policy includes "re-entry" provisions for specific years, necessitating a qualifying physical examination, the illustration presents columns illustrating the premiums for situations where you either passed (or "re-entered") the medical requirements or didn't meet the criteria set by the company.

You absolutely have the option to sell your life insurance policy through a life settlement. Your life insurance policy is your personal asset, giving you the freedom to sell it should you decide to do so.

Experience the Potential: On average, life insurance sales yield 4-6 times the cash surrender value of your policy.

Embarking on the Path: To initiate the process of selling your life insurance policy, it's essential to determine if you meet specific qualifying criteria. These may include:

- Owning a policy with a death benefit of $100,000 or more; policies with lower amounts usually don't qualify, unless significant health issues are present.

- Generally, life insurance policies qualify if the insured is over 70 years of age.

- While an improvement in health since policy issuance can enhance qualification prospects, it's not obligatory.

Tailored Guidelines: It's important to note that each life settlement case is distinct, and these factors serve as general guidelines. Every case is exceptional.

Exploring Terminal Illness Options: If the insured is facing a terminal illness, viaticals can be considered as a potential avenue to sell the life insurance policy.

Your Queries Answered: For any qualification inquiries, you can utilize the Settlement Calculator or engage with a Pivotal  representative at XXX-XXX-XXXX. We're eager to explore all potential options with you!

Individuals aged 65 and older typically qualify for selling their life insurance policy if the policy's face value is greater than $100,000. 

The predominant types of policies sold include universal life insurance and other permanent policies such as whole life. Yet, various types of life insurance policies are eligible for sale. Consult your Pivotal representative to determine the optimal choice for your situation. 

Explore further insights in our comprehensive guide.em.

There are numerous factors that may lead an individual to consider selling their life insurance policy. Here is a concise compilation of common reasons why someone might opt to sell their policy:

1. High Premiums: Premiums tend to rise as a person ages. If you're on a fixed retirement income or dealing with unexpected medical expenses, the burden of high premiums can become overwhelming. Opting for a settlement can provide more financial relief compared to letting the policy lapse.

2. Policy No Longer Needed: When beneficiaries are self-sufficient and no longer rely on the insurance payout, selling the policy for immediate cash might make more sense than keeping it active.

3. Supplementary Income: Whether for retirement or medical costs, additional income is often necessary during one's golden years. Selling the policy can serve as a means to boost income while eliminating premium payments.

4. Term Policy Expiration: Term policies often lack cash value upon expiration, and renewal costs can be steep. Instead of allowing a term policy to lapse, converting it into a universal life policy and subsequently selling it can yield a cash benefit when life insurance needs diminish.

Discover more about the reasons behind selling a life insurance policy in our comprehensive guide.

Pivotal, as a direct purchaser, has meticulously designed an expedited process to facilitate swift policy sales, eliminating intermediaries to ensure you receive maximum returns.

The intricate process of selling your life insurance policy is efficiently streamlined into 8 straightforward stages by Pivotal:

1. Decision Phase

Deliberation is vital. The policyholder and beneficiaries must engage in a thorough assessment of alternatives before proceeding. This involves consulting financial advisors, engaging the Abacus team, and comprehensively exploring options to ascertain the most advantageous route for your family. Rest assured, there are no costs or commitments tied to evaluating an offer.

2. Eligibility Evaluation

Qualification hinges on specific factors, encompassing premium details, insured individual's life expectancy, and death benefit considerations. Pivotal can swiftly determine your eligibility via our Life Settlement Calculator, providing a complimentary instant estimate. Upon commitment to the sale, an in-house medical underwriter will employ disclosed data, utilizing medical records to determine the policy's worth at no expense to you.

3. Presentation of Offer

Pivotal extends a proposal exceeding the policy's price yet falling below the net death benefit. The licensed buyer, complying with state regulations, operates within the policy owner's domicile.

4. Acceptance Phase

Upon acceptance of the buyer's offer, the policy seller has the option to request the requisite documentation for review.

5. Contractual Formalities

Approved by the state, the licensed buyer generates authoritative contractual documents. These papers encapsulate the life settlement agreement, comprehensively outlining terms between the seller and the purchaser. Both parties authenticate the contracts through notarization.

6. Thorough Verification

Subsequent to contract execution and submission of essential documents, the verification stage commences. Typically overseen by a third-party verifier, such as a legal firm, this process ensures accurate completion of contractual forms and validates the policy's active standing with the insurance provider. Additionally, confirmation of funds in an escrow account for the policy seller is executed.

7. Ownership Transition

A formal request for a change in ownership is forwarded to the insurance carrier, certifying the transition from the current policyholder to the buyer.

8. Funds Disbursement

Upon the insurance carrier's confirmation of the buyer as the new owner, the escrow agent is directed to release funds to the seller. The policy's new owner assumes premium responsibilities, while the seller receives payment, marking the culmination of the process. The funds can now be utilized according to the seller's discretion.

This concludes the comprehensive transaction, bestowing financial flexibility upon the insured.

 The value of a policy is determined by several key factors:

- Policy Type

- Policy Face Value

- Age

- Health Status

These factors are used by settlement companies to craft personalized offers for each policy. Once all aspects are considered, a formal offer is presented.

The average payout from a life insurance sale typically ranges from 4 to 6 times the policy's cash surrender value. Here at Pivotal Life Capital, our average payout is even higher, averaging between 6 to 8 times the cash surrender value. As a direct buyer, Pivotal has streamlined the process, ensuring a quick sale while eliminating intermediaries, allowing us to provide you with a more substantial offer.

For an accurate estimate of your policy's value, you can complete a quote request form on our website or call us at 1 (XXX) XXX-XXXX, and a Pivotal representative will be in touch with you promptly!

Life settlements encompass a triad of taxation aspects:

1. Money received up to the tax basis is exempt from income taxation.

2. Proceeds exceeding the tax basis but falling below the cash surrender value are subject to ordinary income tax rates.

3. Funds surpassing the policy's cash value incur capital gains taxation.

Taxable income computation involves deducting your cumulative premium payments (tax basis) from the settlement sum.

In the realm of death benefit payouts to beneficiaries:

Beneficiaries are shielded from including death benefit proceeds in gross income, provided they stem from the demise of the insured individual. While these proceeds remain untaxed, any accrued interest is taxable and necessitates reporting as received interest.

For a comprehensive understanding of life insurance proceeds' tax implications, consult the Internal Revenue Service (IRS).

Over the past decade, the life settlements market has undergone a substantial evolution in terms of regulation. A robust system of oversight has been established, operating on a state-by-state basis, ensuring ethical conduct by companies operating within the market.

Stringent Licensing and Vigilant Oversight

Across most states, stringent licensing prerequisites are mandated to maintain a high level of customer protection. Stringent oversight mechanisms are in place to guarantee the safety of participants.

For instance, according to the Life Insurance Settlement Association (LISA), regulatory states incorporate varying waiting periods before life insurance policy sales can occur. This spans from a 2-year waiting period in 30 regulated states, extending to 5-year waiting periods in 11 states, and a 4-year waiting period in the case of Minnesota. The nuanced specifics differ from one state to another.

Your Guide to State-Specific Regulations

For comprehensive insights into the intricate landscape of life settlement state laws, consult your local insurance department. Abacus Life takes pride in being a licensed life settlement provider across 49 states, demonstrating our commitment to upholding the highest regulatory standards.

Our Licensed Reach

We're pleased to share that Pivotal is licensed to operate as a life settlement provider in the following 48 states:

Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming

Before finalizing the decision to sell your life insurance policy, we recommend taking these steps:

Conduct thorough research: Begin by researching the companies you're considering working with. Check their website to determine if they are a direct buyer, broker, or marketing office. The distinction matters for your privacy. Marketing offices often share your information with other companies for multiple bids. Research ensures your data remains secure.

Observe how you're treated: Pay attention to your treatment during the quote and offer processes. Selling a life insurance policy involves a long-term relationship. If a company pressures you excessively, uses questionable tactics, or is difficult to reach, these behaviors might persist over time.

Understand you have a choice: When you inquire about your policy's value, remember that selling is a choice, not an obligation. If you're young and healthy, waiting a few years might yield a higher payout. Abacus maintains transparency in offer generation, keeping you informed at every step.

Be aware of the policy owner: Depending on your choice of partner, you might receive multiple offers from various companies interested in buying your policy. Marketing offices don't purchase policies; their role is to refer you to buyers. Confirm the identity of the actual buyer for a lasting relationship with them.

Learn more from our comprehensive guide here.

When you're prepared to embark on the journey of understanding how to sell your policy, your first step is to explore the Pivotal Settlement Calculator.

Within 24 hours of reaching out, Pivotal extends an initial, no-obligation offer, provided you meet the eligibility criteria for selling your policy.

Pivotal Life Capital operates under full licensure, and our client-centric ethos guides our approach. We place paramount importance on your needs as the policy owner. Should you require assistance in facilitating this transition, please don't hesitate to inform us. We're dedicated to being of service.

Having facilitated over $1 Billion in placed assets, our offers typically exceed the surrender value of a standard policy by about six times.

Our commitment is unwavering: we empower policy owners with unbiased insights, enabling them to make informed decisions regarding their insurance policies.

Simply click on the FREE CONSULTATION link at the bottom left of your screen.