Q. How do I start the life settlement process with Plymouth?
A. Our process begins with a completed application. Plymouth's application is straight-forward and includes a HIPAA compliant medical release so that we can gather pertinent information about the insured from doctors, hospitals and other medical facilities. The insured will not have to take a new physical exam. All information gathered is confidential and will not be distributed to any third parties without the policy owner's consent. Careful analysis is administered to determine if the policy qualifies for a life settlement before any information is provided to licensed buyers.
Q. What are some of the reasons people choose to do a life settlement?
A. There are countless reasons why policyowners choose to sell their policies. Here are some of the most common scenarios we see: the need for insurance no longer exists or a need for a different type of insurance exists, over-insurance of an estate, rising costs of insurance, premium payments are no longer affordable, to raise capital and/or net worth for other investment opportunities, to assist family members, rising healthcare costs and other costs of living, divorce, dissolution of a business(es), changes in estate tax liability, the policy owner is considering a 1035 exchange, and many others.
Q. Who my be eligible for a life settlement?
A. Insureds over the age of 70 (or insureds that have been diagnosed with a serious medical condition), that have a policy at least 2 years old and a minimum face amount of $100,000.
Q. Does the insured have to undergo a medical exam?
A. No. A life settlement does not require a new physical exam. After Plymouth's medical release is authorized with our initial application, Plymouth obtains and reviews the insured's existing medical records, orders life expectancy reports, and collects other documentation from the insurance carrier to determine the policy's current market value. If the case is approved and our professional assessment agreeable, Plymouth will then proceed to market and obtain offers on behalf of the policyowner.
Q. How long does this process take?
A. The entire process takes approximately 2 to 4 months, from application to funding. Various external factors effect the turnaround time of any given life settlement, but with the proper preparation and execution, Plymouth has turned around cases in less than 8 weeks for previous clients. The collection of medical records, information from the carrier and third party reports, settlement negotiations, the processing of closing documents and changes at the carrier level generally consume the majority of that time. Plymouth ensures any premium coming due after the closing date is reimbursed to the seller along with their life settlement proceeds.
Q. What if the life settlor (seller) changes their mind?
A. Plymouth exclusively represents the seller at all times. A life settlement is not binding for the seller until the closing documents have been signed and the rescission period has expired. The rescission period is typically 15 days but may vary depending on state statues, during which the client retains the right to rescind the life settlement, even in cases where the seller has received their proceeds but Plymouth has not yet been compensated.
Q. What type of life insurance is eligible for a life settlement?
A. Virtually any type of individual life insurance may be eligible, including but not limited to, Convertible Term, Universal Life, Variable Life, Survivorship and Joint Life policies. Policies may be individually owned or owned by trusts, foundations, not-for-profit organizations or businesses.
Q. What are the tax implications?
A. There may be tax implications to a life settlement, but every case is unique. We strongly encourage our clients to discuss potential implications with their financial advisor to review the specific benefits of the transaction and its effects on their tax liability. The proceeds from a life settlement may be taxable depending on the tax basis of the policy, the cash surrender value at the time of the sale as well as the amount received by the seller, although recent federal legislation has greatly benefited life settlors in this regard.
Q. Does the entire policy need to be sold?
A. No, any portion of a policy may be sold with the remaining death benefit being kept in the name of the original beneficiary. The policy may be sold for a lump sum cash payout, additional paid-up insurance, retained death benefit, or any combination of these.
Q. Is the policyowner/insured's privacy protected?
Q. Should the policy be surrendered to the carrier for its cash surrender value (CSV) instead?
A. Based upon current available data, the answer is a resounding "NO". In instances where a life settlement is viable, a life settlement should be preferred. Inherently life settlements are higher than the CSV, moreover recent federal legislation treats life settlement and policy surrender transactions the same from a tax liability standpoint. Data compiled from successful life settlements found that, on average, the life settlement produced somewhere between 3 and 7 times the current CSV of the policy sold.