Colonial pays cash for senior settlements!

Frequently Asked Questions

What types of policies can be purchased? Whole life, universal and convertible term policies are eligible for purchase. The policy can be owned by an individual, trust, corporation or charitable organization. Policies should be at least two years old and non-contestable.

Can policies be sold that are still contestable? Ordinarily, only those policies that have been in place at least two years are eligible. However, we could make an offer on some policies that would be contestable. This is a case by case decision.

Who should consider selling their insurance policies? Typically this vehicle is best suited for individuals age 70 or over that are evaluating health, financial and/or estate planning changes that have taken place in the latter years of their life. Businesses can also benefit from Colonial Settlement’s services when dealing with a sale of a company or when dealing with key-man or corporate-owned policies.

What are the typical scenarios in which people decide to take advantage of a life settlement?

• For estate planning – changes in an estate size can reduce the need for insurance that was initially purchased to pay estate taxes or the insured outlives his or her family or beneficiaries.
• Reinvestment.
• The purchase of survivor policies or other more appropriate insurance products – normally 1 out of every 3 life settlements results in the purchase of a new policy.
• The sale of a business – buy/sell agreements.
• Cashing out of a key-man policy – A key executive leaves the company or a business is sold, and a policy now becomes an asset of the new entity. Those who were key executives as the sellers may not be key executives in the new organization. The acquiring company has three choices –
  1. let the policy lapse
  2. surrender it for the cash value (CSV)
  3. keep it in place and pay the premiums
     A life settlement offers another option: sell the policy and rid themselves of any future premium obligation and receive a lump sum of cash well above the CSV.
• Reexamining COLI upon retirement – many employees are offered key-man or buy/sell policies upon retirement since the company no longer needs them. Often this offer is declined because the retiree either does not need it or does not want to take on the burden of the high premiums. The employer normally either cashes in the policy for the CSV or simply allows it to lapse. Now either the employee or employer can get a quote for such a policy and decide if it is advantageous to sell it, without ever having to make another payment.
• For extended care needs.
• Gifting to family members.
• For charitable contributions – This is often done to reduce the size of one’s estate, either to various entities or to one organization. Utilizing a life settlement is much better than simply donating a policy to charity where it will be obligated to pay future premiums. There is also a larger write-off for the insured if he donates his policy as a life settlement because they can deduct the life settlement value rather than just the CSV. The charity can immediately sell the policy for a lump sum based on the predetermined quote and have no future premium obligations.
• Not-for-profit organizations themselves can cash in policies that have been donated to them in the past to help with immediate cash flow needs.
• Many people would rather see their money working today, whether it be as a donation to charity, a gift to family members or even just for themselves to live life more comfortably.

How large or small can my policy be? Normally, the policy should have a death benefit of $100,000 or more.

More Senior Settlement F.A.Q.'s!