Life Settlements With Apex

Know what you’re getting into, and what you’re getting out of it. Learn how a Life Settlement works so you can decide if it’s right for you.
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Quick terminology guide

Before you go in-depth, here are the most relevant terms:

Death Benefit

The amount of money that will be paid to the beneficiary (or beneficiaries) upon the death of the insured person.

Face Value

The stated dollar value of the life insurance policy. This amount usually equals the policy’s death benefit.

Cash Surrender Value

The amount paid by an insurance company to the policyowner if they voluntarily cancel or surrender their policy.

Viatical Settlement

A type of life settlement designed exclusively for policyholders who are terminally or chronically ill.

What Is a Life Settlement?

A Life Settlement is the sale of a life insurance policy in exchange for a lump sum cash payment.

In a Life Settlement, the settlement amount will be more than the cash surrender value of the policy, but less than the death benefit .

In exchange for the lump sum payment, the seller will no longer be responsible for premiums or have rights to the death benefit . The buyer of the policy will assume all aspects of ownership, including future premium payments, as well as the death benefit .

Most people purchase a life insurance policy for financial protection. But when the need for protection has passed, or the policy premiums become an unwanted burden, a Life Settlement can be a great option.

Life settlements, In greater detail

Read on for an in-depth look into how life settlements work, their regulations, history, and everything you need to know to make an informed decision.

Why pursuing a Life Settlement?

Your life’s priorities are always changing. Perhaps your premiums have become unaffordable, you no longer need the coverage, or you simply want the cash to fulfill a lifelong dream.

Premiums are unaffordable

How you live with your money is your decision, and insurance premiums may sometimes become an unnecessary burden. By selling your policy you not only get relief from ongoing payments, you also enjoy a lump sum payout today.

Enjoy more wealth in retirement

A comfortable, secure retirement relies on a financial cushion created by years of savings. Studies show, however, that many retirees face funding shortfalls¹. A life settlement can bolster your financial cushion to add comfort, security, and fun.

Life insurance no longer needed

The original purpose for your insurance coverage might no longer exist. Your children might have grown up. The mortgage might be paid off. Taxes might no longer worry you. Unneeded coverage can be sold, eliminating the expense.

Term policy is expiring soon

A term policy provides coverage for a certain time period, and then expires with no surrender value . However, you may be able to convert your policy to a permanent plan, such as a universal life policy, and sell the new plan for cash.

Pay for quality senior living

Senior living communities and in-home care are costly. A life settlement can provide you with the resources to help afford these services, so you can live your golden years on your own terms, near or with family.

Pay for better medical care

Medical expenses can add up quickly, and selling your policy can provide additional funding during a time of need, offering relief, alleviating financial burdens, and even making upgraded care possible.

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Life Settlement Options

There are multiple options when it comes to Life Settlements. The most common types are traditional, viatical , and retained death benefit settlements. Here’s a closer look at each:

Traditional

A traditional life settlement is the most common way to sell your life insurance policy. Insured individuals who are age 65 and older and hold a life insurance policy that is worth $100,000 or more may be eligible.

Viatical

A viatical settlement is quite similar to a traditional life settlement, with the exception that it is designed specifically for individuals who are chronically or terminally ill. There is no minimum age requirement.

Retained Death Benefit

This option helps you retain a portion of the death benefi t after the life settlement . The buyer will assume the payment of the premiums and will receive the remaining portion of the death benefit .

Weighing your available options

A life settlement may or may not be the right option for you. But the key is to understand your options and make an informed decision. Here are some advantages and disadvantages of a life settlement for consideration:
  • The primary advantage of a ​life settlement​ is financial. By eliminating ongoing premium obligations and receiving a lump sum of​ cash​, you find yourself with new money in your budget. Sellers have many uses for these funds, from payment of medical or care expenses to supplementing retirement​ income and travel.
  • The disadvantage, of course, is that the benefit of the policy will be paid to the new owner, and not the seller’s beneficiary. In addition, the ​cash payments​ are considered income, and therefore may have tax consequences and impact your eligibility for Medicaid.
  • Other considerations include transaction costs or commissions, if you are working with a broker. Typically, a broker charges a commission as a percentage of the sale proceeds, and rates can vary. Know before you get into it.
  • In general, your original decision to purchase life insurance was a financial one — to protect against a risk that could bring financial harm. Your decision to ​sell a life insurance policy​ is often financial as well: funding your next chapter is more valuable than protection.

How to determine eligibility

When it comes to selling your life insurance policy , multiple variables can affect your eligibility. The 3 most basic requirements are:

Age

To be eligible for a ​life settlement​, most companies require you to be ​at least 65 years old​ or have a serious medical condition. Life expectancy and health status are also relevant factors when finding a buyer in the settlement​ market.

Policy Type

There are multiple types of policies in the market that can be eligible for a life settlement​, and different providers may specialize in different policy types. Apex Settlement Group works with all common types, including ​universal life​, ​whole life, and ​convertible term policies.

Policy Value

The third major factor is how much the ​death benefit​ of the life insurance policy is. Typically, minimum coverage of $100,000 is required to make a life settlement worthwhile, although some companies may set higher coverage minimums to enter into a settlement.

Start The Process

A step-by-step guide to the Life Settlement process

Apex is committed to simplify the complex process for you. Here are the steps of a life settlement process, so you know exactly what to expect when selling your policy. Keep in mind that although every process is different, a typical transaction can take 4 months to complete².
  • 1

    Application

    The life settlement process begins with collecting some basic information about the owner, the insured, and the policy. Apex offers a simple application that includes release forms so additional information can be requested for underwriting.

  • 2

    Information

    Detailed information is collected for underwriting of both the policy and the insured. For the policy, information will include the policy’s costs, features, and policy illustration. The releases will be used to gather the insured’s medical records for review.

  • 3

    Review

    Once the policy and insured records are collected, we have enough information to determine the value of your life insurance policy, and the amount of cash we can offer you to fund whatever you have planned next.

  • 4

    Offer

    After completing the review, the provider extends an offer either directly to you or to your advisor. There is no obligation to proceed with a sale; it is 100% your choice whether to accept or decline the offer.

  • 5

    Closing

    Once you accept the offer, the provider will prepare agreements (according to your state's requirements). After contracting and diligence are complete, the request to change ownership + beneficiary will be sent to the carrier.

  • 6

    Funding

    Once the change of ownership and beneficiary is verified, the settlement payment funds will be transferred to the policy seller through a single direct deposit or a check. At that point, you are free to enjoy the funds at your discretion!

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    Does a life settlement incur a tax liability?

    The IRS provides guidance for the taxation of life settlement proceeds. When you sell a policy , the proceeds are considered to fall across the following three categories:

    Tax-Free

    Proceeds up to the tax basis, which is the amount of premium paid-in over time, is tax-free.

    Ordinary Income

    Proceeds greater than the tax basis, and up to the amount of the cash surrender value, is taxed at the seller’s marginal tax rate.

    Capital Gains

    Proceeds in excess of the cash surrender value are taxed as short-term (up to 24 months) or long-term (24 months and beyond) capital gains.

    Other regulations on the life settlements industry

    Approximately 90% of the population of the United States is covered by life settlement regulation. In 43 states and the territory of Puerto Rico, comprehensive laws and regulations exist for life and Viatical Settlement transactions. Regulations in most states include:
    • Licensing of brokers and agents.
    • Licensing of providers (purchasers).
    • Required disclosures of risks and alternatives.
    • Required notice of taxation.
    See if you qualify

    Consult with a tax professional for clarity on both the IRS guidance and how your state of residence would view life settlement proceeds. Apex Settlement Group does not provide tax, legal, or accounting advice. This information is not intended to provide or to be relied on for tax, legal, or accounting advice. Consult your personal tax, legal, and accounting advisors before getting into any transaction.

    ¹ Baby Boomers have an average of $152,000 saved for retirement, according to the 19th Annual Retirement Survey of Workers conducted by the TransAmerica Center for Retirement Studies. This is not nearly enough to last through retirement. Based on information from the Bureau of Labor Statistics, adults between ages 65 and 74 spend, on average, $48,885 a year. Source: Investopedia

    ² Source: LISA Website

    Let's get in touch!

    Apex consists of an expert family of Policy Guides who offer insightful education, continuous guidance, and direct access to life settlement capital markets. We promise you an informed, 1:1, hands-on experience that will leave you feeling in control and in the know.
    (888) 790-7778