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Get Cash By Selling Your Life Insurance Policy!

The transaction, known as a Life Settlement, can provide an immediate cash benefit that can be used to invest for increased retirement income, to provide funds for long term care expenses, to help benefit a favorite charity or as a tool to help restructure an existing life insurance program.

A Life Settlement is a financial planning strategy under which an existing life insurance policy is sold on the secondary market to an institutional investor for a lump sum cash payment that is greater than the policy’s cash value. Once the transaction is completed, the purchaser becomes the owner and beneficiary of the policy and is responsible for all future premium payments. Because of their flexibility, life settlements have become one of the fastest growing segments of the financial services industry.

Due to longer life expectancies, most major insurance companies have dramatically reduced the mortality charges used in new policies. As a result, if an individual has an insurance policy that’s more than four or five years old, they may not be getting maximum value for the premiums they are paying.

The ideal candidate for a Life Settlement is an individual at least 65 years of age with $250,000 or more in current insurance coverage. All types of insurance policies can be used including term, universal, whole life and survivorship policies. The policies can be owned by individuals, businesses, or trusts.

Two examples of recent Life Settlement transactions are shown below.

The investor selling his or her policy receives a lump sum payment - and the amount of that payment will depend on a range of factors including the investor's age, health and the terms and conditions of the life insurance policy. These are examples only, the results will vary per individual.

The purchaser agrees to pay any additional premiums required to keep the policy in effect and receives the death benefit when the investor dies.

The Policy will be owned by a third party who will be entitled to the Policy benefits as long as they own the Policy and it remains in force and has the right to sell the Policy to others. Owner is foregoing rights as owner and, if applicable, beneficiary of the Policy and any beneficiaries that would have been entitled to receive Policy benefits prior to the sale of the Policy will no longer be entitled to such benefits.

Owner also understands that the proceeds from a life settlement transaction may be subject to claims of creditors.

The lump sum payment you receive can be taxable, depending on your circumstances. If you currently receive state or federal public assistance such as Medicaid, a life settlement can negatively impact your ability to participate in those programs.

When you sell your life insurance policy, you will have to authorize the release of medical and other personal information so the buyer can determine how much to offer for your policy. That information may be shared with other parties, including lenders or third party investors. Before accepting any offer from a life settlement company, make sure it has procedures in place to protect the confidentiality of your information.
The amount received for the sale of the Policy may be more or less than what others might receive for the sale of a similar policy. There may be high fees associated with the sell of of a Life settlement.

Please contact NWA for more information.

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People use life insurance for a variety of reasons … and have for years utilized various financial strategies to help pay the premiums. Recent changes in premium financing structures have made it possible for an individual to acquire substantial additional permanent life insurance benefits for minimal out-of-pocket cost, no ongoing premium payment obligation and without disrupting their existing financial and estate planning strategies. The “Self-Financed” Life Insurance Program (SFLIP) in its various forms represents the latest of these innovations.

There are several versions of the (SFLIP), but they all function generally as described below:

The Insured applies and is approved for new life insurance coverage. The eligibility requirements and maximum amount of insurance available vary with the program structure.

Once the insured has been approved, an Irrevocable Life Insurance Trust is created to own the policy, and the insured makes any required payment. The amount of the payment varies by Program design, but typically is no more than six-month’s premium. After this payment, the insured generally has no further payment obligation.

The Trust enters into a financing arrangement with a participating lender to provide the funds to pay future premiums and other obligations of the Program. The insurance policy is assigned to the lender as collateral for the loan.

The Trustee handles the premium transactions and other administrative matters related to the operation of the Program.

This is NOT free insurance. At the insured’s death, the premium loan and interest is repaid from the policy proceeds and the balance is distributed to the beneficiaries in accordance with the terms of the Trust. Also, the “Self-Financed” Life Insurance policy (like other insurance purchases) utilizes a portion of an individual’s capacity to have insurance on their lives.

“Self-Financed” Life Insurance Programs are offered as a package, a specific lender working in conjunction with one or more insurance companies and the Trustee. In this way, the insured does not have to shop for a lender, insurance company, etc.

The (SFLIP) can also be a very effective tool for an individual who wishes to make a current tax-deductible contribution to a non-profit organization. The gift can be made from existing assets, and the (SFLIP) death proceeds can used to replace the value of the assets used for the gift.

The result is:
~ The individual can make the donation immediately … and receive a tax deduction.
~ The insurance replaces the value of the assets donated … no change in inheritance for the heirs.
~ No on-going out-of-pocket cost for the “wealth replacement” insurance.

Withdrawals from existing policies may be subject to federal income tax and may reduce the death benefit. Borrowing money from an existing policy will almost certainly reduce the death benefit. Withdrawals or loans may make it more difficult to keep the original policy in force without additional out-of-pocket premium payments. If you can't keep the original policy in force, you will lose the insurance protection and the loans themselves may give rise to tax consequences.

Investors should consult with their own professional advisor regarding the potential tax, estate, and legal considers that may arise in connection with entering into a premium finance or life settlements transaction.

Please contact NWA for more information.

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Is Your Life Insurance

Still Responsive to Your Needs?

During the last several years there have been significant improvements in the pricing, flexibility and guarantees in new life insurance policies. These include:

If an individual has a life insurance policy that is more than five years old, it may not reflect these latest improvements and could fall short of meeting the needs it was purchased to address. Because of this, National Wealth Advisors offers its clients a FREE service to review existing policies to determine whether or not they contain the latest improvements and whether or not there are more cost effective policies to meet current needs.

The end result is:

Replacing your policy should only occur if it is in your best interest and only after evaluating your personal and financial situation and needs, tolerance for risk, and the financial ability to pay for the proposed insurance policy.

Please contact NWA for more information.

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