What is a life settlement?
A life settlement is a financial transaction in which a policyowner sells his or her life insurance policy to a licensed life settlement provider for more than its cash surrender value.
What types of life insurance policies qualify?
Most types of life insurance qualify, including universal life, whole life, variable life, survivorship, group life and even term life.
Can I sell a portion of my life insurance policy?
It is possible to sell your policy, eliminate premium payments and keep a portion of the death benefit.
How can a life settlement help me?
Selling your policy can supplement your retirement income, free up cash that was being used to pay premiums, fund a long-term care policy, cover unexpected medical expenses or pay off debt. In fact, you can use the money for anything you choose.
And if you still need insurance, you can retain a portion of your coverage while eliminating your ongoing premium payments.
How much could I expect to receive if I sell my policy?
Policyowners who choose to sell their policy receive on average more than four times what they would receive from surrendering their policy back to the life insurance company (London Business School Study, June 2013). Every case is different, however, and the size of the payment is determined by variables such as your health, the type of insurance policy you have and the policy’s premiums.
Why doesn’t Coventry offer a life settlement calculator?
Life settlement calculators that offer “instant” results are based on limited information, typically just the size of the policy and the age and sometimes the general health of the insured. They only provide rough estimates of value that are frequently incorrect.
Because each case is different and we want to provide you with accurate information, we believe that personal attention from an experienced Coventry Direct policy specialist is the best approach.
Do I qualify for a life settlement?
If the face amount of your life insurance policy is at least $100,000 and you have had a change in health, you may qualify to sell your policy.
Can I use the cash from selling my policy any way I want?
There are no restrictions on the use of the proceeds. Many policyowners use the money to fund long-term care insurance, cover medical costs and/or supplement their retirement income. The choice is yours.
How are life settlements taxed?
The Tax Cuts & Job Act of 2017 (TCJA) simplified the tax consequences of selling your policy. Unless an exception is met, the sale proceeds will be taxed as follows:
- Tax Free – Proceeds you receive up to your tax basis (i.e., the total amount of premiums you paid over time) are not taxable;
- Ordinary Income – Proceeds you receive in excess of your tax basis up to the amount of your policy’s cash surrender value are taxed as ordinary income; and
- Capital Gains – Remaining proceeds are taxed as capital gains.
However, for insureds who meet the IRS definition of “terminally ill individual” or “chronically ill individual,” the entire amount of the sale proceeds can be received tax-free1.
Is my information kept confidential?
1Coventry Direct does not offer tax or legal advice. You should consult your own tax or legal advisors before entering into any transaction.