Life Settlements - Frequently Asked Questions...

Q: What is a Life Settlement?

A: A Life Settlement is a cash payment in exchange for an existing life insurance policy, with payment in excess of the cash-surrender value. The purchaser pays all of the future premiums that are due until the policy matures. If a client is looking to surrender their policy to the carrier for a cash-surrender value, they should consult Milestone as a life settlement will typically pay 2 to 5 times more than the cash-surrender value.

Example: A senior owns a $500,000 life insurance policy with a cash-surrender value (CSV) of $15,000. Milestone evaluates the policy and offers the client $48,000 in exchange for transfer of beneficial interest in the policy.

Q: What is the difference between a life settlement and a viatical settlement?

A: A Viatical Settlement is similar to a life settlement, however the client has a terminal illness or a life expectancy of less than 36 months. The term is defined by state law. If state regulations appliy, entities involved in the transaction must be licensed as either a viatical settlement broker or a viatical settlement provider in order to process the settlement.

Q: What are reasons for choosing a Life Settlement?

A: Clients offer the following reasons for choosing a Life Settlement:

The sale of the policy would allow the policyholder to achieve an improved standard of living
The policy premiums are too costly to continue paying
The policyholder requires funds to pay for medical expenses
The original need for the life insurance policy no longer exists
The beneficiary of the policy is deceased
The policyholder wishes to purchase a new life insurance policy better suited to current financial needs
The policyholder wishes to make a cash donation to a charity
A "key man" policy held is no longer necessary as the employee has left the company

Q: What types of policies are considered for a Life Settlement?

A: Almost every type of life insurance policy is considered for a Life Settlement. Among them are Term, Universal Life, Whole Life, Survivorship, Key-man. The life insurance policies can be owned by individuals or entities, such as trusts, corporations and charitable organizations.

Q: How can the money from a Life Settlement be spent?

A: There are no restrictions on how the proceeds from a Life Settlement are spent. You may use the settlement money to take a vacation, pay off debt, or fund a new life insurance policy.

Q: Who will pay the premium on my Life Insurance policy?

A: Once the life settlement is complete, all future premiums will continue to be paid by the institutional investor that purchases your policy.

Q: Are the proceeds from a Life Settlement taxable?

Milestone highly recommends that the client to seek the assistance from his or her professional tax advisor. The proceeds of a life settlement are not taxed on any amount recieved that is equal or less than the amount of premiums that were paid into the policy. The amount of money recieved between the premiums paid and the cash-surrender value of the policy is taxed as ordinary income. If there is an amount recieved in excess of the cash-surrender value of the life insurance policy, this will normally be taxed as a capital gain.

Q: Are my records kept confidential?

A: Yes, all records are securely stored in accordance with HIPAA and state laws. The information and documentation provided will only be reviewed by Milestone and our institutional investors that we represent.

Q: How am I protected ?

A: Life settlements are regulated on a state by state basis. Certain states require both the client's repesentative (Life Settlement Broker) and the buyer(Life Settlement Provider) to be registered with the state as a licensed entity. Please see the Life Settlement Regulation Map for additional information. Milestone is a strong advocate of transparent transactions and requires full-disclosure in all transactions, so that the consumer knows exactly what compensation each entity involved is recieving. After the settlement proceeds have been disbursed to the seller, there is a 15 day rescission period in which the seller can request to have the changes reversed.

Q: How much will I receive for my policy?

A: There are a number factors that determine the amount of money that can be recieved for a life settlement. The major variables in the pricing are the cost of insurance required to keep the policy in-force and the health of each insured. Information such as death benefit, type of policy, insurance carrier rating may be deterministic in Milestone's interest in the policy. Further information such as life expectancy reports may be required in order to evaluate a submission, which may increase the offer that Milestone is willing to give, if the insured is in sub-standard health. The average settlement amount is 2 to 5 the cash surrender value of the policy.

Q:Who are candidates for a Life Settlement?

A:Here are some general guidelines that indicate if an individual could be a potential candidate for a Life Settlement:

Clients age 65 years and older
Individuals with declining health since policy issuance or suffering from a terminal illness
Insurance coverage with a face amount $50,000 - $10,000,000

Q: Why should I work with Milestone Providers?

A: Milestone's mission is to offer settlement services to the industry while maintaining the highest degree of integrity, dignity, and fairness. Milestone represents a few of the world's leading institutional investors and provides the quickest turn-around time in the industry by utilitizing our state-of-the-art policy acquisition and management software. Milestone has built a sterling reputation in the industry and is committed to maintaining this reputation. Milestone has dedicated itself to giving ten percent of its pretax income to philanthropy and charitable causes.

Q:What are the steps in the application process?

A: In order to give an indication of value on an in-force life insurance policy, Milestone only requires a completed Life Settlement Application and an illustration showing account values greater than zero until age 100. We can request an illustration on behalf of the client once we recieve the Authorization to Release Policy Information form. Both documents can be downloaded under the "Forms" link to the right. You may also review Milestone's compete Life Settlement Process.

Q:Do I have to be licensed to work directly with Milestone Providers?

A: Milestone does not require any signed exclusive agreements in order to begin dealing with us. If a representative is assisting the seller, than the representative or representative's firm must be licensed as a life settlement broker in the policy owner's state of residence, if state regulations apply. State regulations do not require the seller to be licensed in any form to sell his or her life insurance policy.