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Choosing the right life settlement company

Selling your life insurance policy is a major decision. With such an important asset exchanging hands, you want to make sure you’re informed during the life settlement process, and of course, getting the best price for your policy. Choosing the right life settlement company is the way to achieve both.

With dozens of life settlement companies to choose from, and different regulations in each state, it can feel difficult knowing which is the right company for you. That’s why we broke down eligibility requirements, offer size, and company reputation, to bring you a comprehensive guide to the best life settlement companies of 2021.

What is a life settlement?

Life settlements work like this: A life insurance policy owner agrees to sell their policy to a third party in exchange for a lump sum cash payment. This process designates the buyer as the sole beneficiary of the policy’s death benefit, in exchange for assuming the monthly premium payments for the policy.

The amount the policy owner receives is typically larger than the policy’s cash surrender value, and is typically worth 10-30% of the policy’s face value. Typical reasons for getting a life settlement include paying for large medical expenses or long-term care. For those in a financially stressed circumstance, the life settlement option offers both immediate cash value for an existing life insurance policy, as well as offloading the expense of future premiums onto the purchaser.

Life settlements go by a number of names including, “senior settlements,” “reverse life insurance” or for individuals who are terminally ill, “viatical settlements.”

What do life settlement companies do?

In a life settlement transaction, life insurance policyholders are technically the “sellers” and life settlement companies are the ‘buyers’. These are companies you may have heard of like Coventry or Magna Life, and are different from your life insurance company (which underwrites the existing insurance policy, not the settlement).

Life settlement companies often purchase life insurance policies on behalf of large institutional investors, who will ultimately hold those policies until maturity, as part of a diversified financial portfolio.

While life settlement companies offer a similar product, they often differ in pricing, and in scope of eligibility, which is why individuals are encouraged to shop around with different life settlement companies to ensure they get the best offer for their policy.

What is a life settlement provider?

The term “life insurance company” refers to a party that is legally licensed to conduct the sale of a life insurance policy. However, life settlement companies can be two types of entities: life settlement providers and life settlement brokers.

A life settlement provider is a business that purchases life insurance policies. They don’t have a fiduciary obligation to policyholders, and their obligation is often largely to maximize the profit of the firm for whom they are buying the life policy.

What is a life settlement broker?

A life settlement broker, on the other hand, is someone who connects policyholders with potential buyers. This is done for a fee, usually given as a percentage of the policy’s death benefit. Life settlement brokers act as an intermediary between policy owners and policy purchasers throughout the entire process, often handling medical paperwork, and negotiating competitive prices for the settlements.

Life settlement brokers can either be companies or individuals, such as financial advisors or insurance agents. Whether a life settlement broker is an individual or a company, they are under a fiduciary responsibility to serve their clients’ best interests (life settlement providers do not have this obligation). Both brokers and life settlement companies are regulated by the local state department of insurance.

One thing to note is that certain companies, such as Ashar Group and Windsor Life Settlements, can act both as life settlement brokers and providers.

What to look for in a life settlement company

When it comes to evaluating life settlement companies, there are a few factors you’ll want to consider. Trusted industry group, the Life Insurance Settlement Association (LISA), has a list of questions they recommend asking. Here are a few of the most important below.

  • Do they operate in your state? Currently, both life insurance and life settlements are regulated state by state, meaning some life settlement companies don’t operate in all 50 states. If your company doesn’t offer settlements nationwide, make sure they operate in your state before proceeding to get a quote.
  • How long have they been in operation? Generally speaking, a long track record of operation is a good sign for a life settlement company. However, life settlements are fairly new in popularity, so even many of the oldest companies tend to be less than 20 years old.
  • Who is eligible? Every life settlement company has slightly different standards on whose policies they accept, based on factors such as age, life expectancy, policy type, and what type of settlement they are seeking. Before investing any time in researching a company, you may want to start by using a life settlement calculator to determine if you’re eligible to receive a settlement offer.
  • Company Reputation. The life settlement industry is well regulated, meaning you can easily find if a life settlement company has any complaints against them. We recommend checking for any complaints with the Better Business Bureau, or National Association of Insurance Commissioners before proceeding with a life settlement company.
  • Bonded and Insured. A good life settlement company will be bonded and have E&O insurance, both of which cover your payment in the event the life settlement company can’t meet its financial obligations. It’s always a good idea to check and see if your life settlement company is bonded and insured before proceeding to make a purchase.

Top life settlement companies in 2021 

Based on reviews, payouts, certifications, and experience, here are the best life settlement companies for 2021.

Coventry 

Coventry is the largest and arguably best-known life settlement provider in the nation, providing over 44% of the nation’s life settlement transactions in 2019, once again earning it recognition as the #1 Life Settlement Provider, according to business publication, The Deal. Coventry has been in operation for over 35 years, and has paid out over $3.5 billion to customers, yet despite its size has continued to give quality customer care and attention. 

Coventry focuses on policies exceeding $100,000 for individuals over age 70, and the policy seller cannot have a life expectancy of over 20 years. Coventry does not charge a brokerage fee to policyholders and is available in all 50 states. Their process may take up to 30 days. 

Magna Life Settlements

With over 80 years of life insurance and life settlement experience, Magna has worked directly with customers since 2004, selling over $2 billion in life insurance policies since 2016 alone. Their clear and straightforward application process features a highly rated life settlement calculator, and the company has many useful client resources such as a YouTube channel, and a great checklist of paperwork needed on their policyholder settlement page.

Unlike Coventry, Magna is licensed to do business in only 27 states, but their age qualification is a bit younger at 65. Their payout tends to be in the 33% range, on the higher end of life settlement providers. Magna also proudly abides by LISA’s Code of Ethics and Standards of Professional Conduct. Magna does not charge policy sellers a brokerage fee. 

Berkshire Settlements

With over 60 years combined experience in the life settlement industry, Berkshire Settlements has a specialty for viatical settlements, particularly those who have a cancer diagnosis and are looking to pay for treatments.

Berkshire is family-owned, and smaller in size than industry leaders like Coventry and Magna, however, their small size also ensures their clients receive personalized attention. Berkshire also has downloadable offline forms for all 39 states in which they are currently licensed to operate. Berkshire has been a voting member of LISA since 2011. 

Q Capital

Operating since 2004, Q Capital accepts individuals as young as 60 years old (given they have a recent change in health), who have a policy value of at least $100,000. Q Capital has differentiated itself with its QUOTE system, industry-leading software that completes “complicated processes and analyses quickly and accurately.” Q Capital accepts most life insurance types, including whole life, convertible term, universal life, and survivorships.

Their sales process takes 30 to 60 days, and they don’t charge a brokerage fee. However, Q Capital is only licensed to operate in only 32 states.  Q Capital has also developed an Anti-Fraud Program which is more rigorous than any current legislation in the industry.

Abacus Settlements

Abacus has a reputation for having some of the swiftest and largest payouts in the industry, with settlements averaging 23% of death benefits, with settlement offers in just 2 to 3 weeks (this does not include the closing process).

Abacus prides itself on transparency, even explaining the math behind each settlement figure. They help with everything from APS retrievals to medical records, and will be the only one handling your settlement from start to finish. Abacus is a member of LISA and licensed to operate in 44 states.

Ashar Group

Ashar Group is a family-run business that’s been in business since 2013. Their company has a strong reputation and their CEO Jon Mendelsohn is a known expert in the life settlement space. They take pride in being “deliberately independent” and have a policy auction platform designed to get you the best offer for your life insurance policy

Habersham Funding 

With over 150 years of collective experience, Habersham Funding was started in 2001. The company is known for its leading fraud prevention process and for delivering the highest payouts in the life settlement market.

The percentage of life settlement payouts coming from Habersham Funding are reported to range from 1% to just over 41%. In 2019, the company paid out an average of 41.33%, which is over double the industry average of 20.28%. 

Best companies for viatical settlements

A ‘viatical settlement’ is a term for a specific type of life settlement, commonly used in reference to those who have a chronic or terminal illness. The importance of the distinction is that viatical settlements tend to have a higher value on the secondary market than standard life settlement policies, meaning a policy owner will receive a higher portion of the net death benefit.

You can typically find offerings for viatical settlements from any life settlement provider, however, due to their competitiveness, you may find additional smaller companies who are willing to invest more easily than for a healthy individual of the same age group. When applying for a viatical settlement, you’ll want to have full access to your medical history.

Get a free policy valuation

The life settlement option is a practical method for policyholders to access a cash lump sum when they need it most. However, precautions should be taken, and you should take time to discuss your options with a financial planner and your loved ones.

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