FAQs
(Note: these questions have been compiled to address both
brokers and their clients.)
What
are life settlements?
How do life settlements
work?
Is
there a difference between a broker and a provider representative?
Is
the provider, provider representative or broker required
to keep my information confidential?
If
I enter a life settlement contract, when will I get my
money and who from?
What if I change my mind?
What happens after
I get my money?
What
if I don’t want to be contacted about my health
status?
How
will I know who will be calling me or my contact person
about my health status and how often can they call?
Will
the provider be calling my doctor to check on my health
status?
Does
anyone make money or commissions from the sale of my policy?
How
will I know if my policy includes extra coverages like
accidental death, future increases in the death benefit,
or covers other family members? Do these affect my settlement?
Are
there other options available besides selling my policy?
What
other things should I know about a life settlement contract?
What are life settlements?
A
life settlement is the sale of a life insurance policy
or certificate (hereafter referred to as policy) issued
on the life of a person (who does not have a catastrophic
or life-threatening illness or condition that is likely
to result in death within 24 months) for a dollar amount
that is more than the cash value surrender. The person
who is insured under the policy is called a life settler.
This person may or may not be the owner of the policy.
Only the owner of the policy has the right to sell the
policy. If you do not own the policy, the owner cannot
sell the policy without the insured’s consent. The
entity that buys the policy is called a life settlement
provider (hereafter referred to as provider). A life settlement
offers you the opportunity to receive a portion of your
or your client’s policy’s death benefit while
you or they are still alive.
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How
do life settlements work?
Most
providers, provider representatives or brokers will ask
you to complete an application, along with policy and
medical release forms so that they can gather information
from your or your client’s life insurance company
and doctors. All information gathered must be kept confidential
and cannot be given to anyone without your written approval.
If you qualify, the provider will make you an offer for
your policy. The amount offered for your policy will be
based on 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 (e.g., a waiver
of premium). If you accept the offer, you will be asked
to sign a life settlement contract.
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Is
there a difference between a broker and a provider representative?
Yes.
Although both a broker and a provider representative will
help you with the sale of your policy, there are important
differences between them. A broker works for you. A broker
will check with several providers to find the best offer
for you. A provider representative works for a provider.
A provider representative will only check with the provider
that he or she works with to get you their offer. If you
use someone to help with the sale of your policy, you
may want to ask whether they are a broker or a provider
representative.
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Is
the provider, provider representative or broker required
to keep my information confidential?
Yes.
Any financial, medical or personal information obtained
by a provider, provider representative or broker about
you, including your family members, a spouse or a significant
other, may not be shared with anyone unless you have given
written approval that the information may be shared. Any
written approval for the sharing of this information must
show who may get the information and why it will be released.
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If
I enter a life settlement contract, when will I get my
money and who from?
Providers
generally use an escrow agent or trustee to handle the
money that will be paid to you. The escrow agent or trustee
will send you the money within three business days of
the date the insurance company confirms to the provider
that the transfer of ownership has been completed.
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What
if I change my mind?
If
you change your mind about selling your policy, you can
cancel the settlement contract at any time up to five
days from actual signing. To cancel the life settlement
contract, you will have to return any money the provider
paid to you for the purchase of your policy along with
any premiums the provider paid to keep the policy in force.
If you change your mind, remember to arrange with the
provider to have the insurance company transfer the ownership
of the policy back to you.
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What
happens after I get my money?
After
the provider has paid the owner for the sale of the policy,
they may begin calling to check on the health status of
the life settler.
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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, and you must give the provider their name, address
and phone number. Once you give the provider this information,
they may not contact you unless they have tried and have
not been able to reach your contact person for more than
30 days. If you need to, you can change your contact person
at any time by sending a written notice to the provider.
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How
will I know who will be calling me or my contact person
about my health status and how often can they call?
The
provider 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. Contact is limited
to no more frequently than once every three months.
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Will
the provider be calling my doctor to check on my health
status?
Some
providers will use your signed medical release form to
check with your doctor for updates on your health status.
The medical release form tells your doctor that you want
to give your medical information to the provider, broker
or provider representative.
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Does
anyone make money or commissions from the sale of my policy?
You
have the right to ask for and receive the names of all
brokers or agents representing you who have or will receive
some type of payment from the sale of your policy, along
with the amount and terms of the payment. You may ask
for this information at any time.
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How
will I know if my policy includes extra coverages like
accidental death, future increases in the death benefit,
or covers other family members? Do these affect my settlement?
•
Some policies contain extra coverages. You may want to
contact your insurance company or agent to see if your
policy contains a provision or rider providing extra coverages.
• If your policy includes a benefit for accidental
death, the additional death benefit may not be included
as part of your settlement. The additional death benefit
will remain payable to your beneficiaries or your estate.
• If your policy provides future increases in the
death benefit, you may want to ask how much the provider
is paying you for the purchases of this benefit.
• If your policy is a joint policy, or provides
coverage on the lives of other family members or anyone
other than yourself, there may be a possible loss of coverage.
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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. Before entering into a life settlement,
you should contact your insurance company or agent to
see what options are available.
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What
other things should I know about a life settlement contract?
Some
things that may be affected if you enter a life settlement
are:
There may be a loss of life insurance coverage on your
spouse or other family members. If the policy (or any
riders attached to it) covers their lives;
The
amount of premiums you pay;
Policy
cash values or dividends, if provided for in the policy;
A
loss of other rights or benefits, including conversion
rights and waiver of premium benefits that may exist under
the policy;
You
may incur tax consequences
Your
ability to receive supplemental social security income,
public assistance, and public medical services including
Medicaid; and
The
money you receive for your life settlement could be taken
away from you by creditors, personal representatives,
trustees in bankruptcy and receivers in state or federal
court.?
Because
of the above, you should contact an attorney, accountant,
estate planner, financial planning advisor, tax advisor,
social services agency, your insurance company, or agent
as applicable, to find out what effect selling your policy
will have on you.
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