In a Life Settlement, a donor age 65 or older sells his or her unwanted, unneeded or unaffordable current life insurance policy on the open market in a competitive bidding process to a third party (an institutional buyer or funding company). The buyer assumes ownership of and beneficiary rights to the policy, pays the premiums and receives the face value of the policy when the policy matures. The donor receives a lump sum payout of more than the policy’s cash surrender value. All or part of the payout can be donated by the individual to the SAG Foundation or used in any other manner he or she sees fit, without restrictions. The payout amount (on average, 3.6 times greater than the cash surrender value of the policy) is based on such factors as the insured’s policy type, amount of premiums, his or her health status and age.
A Life Settlement is an excellent alternative to merely cashing in a policy for its surrender value or allowing it to lapse. It offers a source of cash that may be used at the donor’s discretion and is an especially good option for those who are facing a change in health status or estate planning needs or are approaching retirement. Most policy types (term, whole life, universal life, etc.) are eligible if they were owned for at least two years. The policy can be owned by an individual, a trust or a corporation, providing the insured is of qualifying age.
