A life settlement occurs when you sell your Life insurance plan in exchange for some quick cash. To qualify for a life settlement, you must be at least 70 years of age or suffering from a severe medical condition. You must have an eligible policy worth at least $50,000.
The history of the life settlement can be dated back to the year 1911—108 years ago! The process of life settlements originated from a Supreme Court case known as Grigsby v. Russell.
Dr. A.H. Grigsby was assisting a patient by the name of John C. Burchard, who was in immediate need of surgery but had no means of paying for it. Burchard offered to sell his life insurance policy to Dr. Grigsby. In return, he would receive $100, and Grigsby would pay the remaining premiums. Grigsby agreed.
A year later, Russell passed away, and Dr. Grigsby tried to collect the benefits. The executor of Burchard’s estate – R.L. Russell – challenged the legitimacy of Grigsby’s ownership of the policy in court and won.
Grigsby decided he wasn’t going down without a fight. His case eventually made its way to the Supreme Court. After deliberating, the judges decided in favor of the doctor. Justice Oliver Wendell Holmes J. announced:
“So far, as reasonable safety permits, it is desirable to give to life policies the ordinary characteristics of property. To deny the right to sell except to persons having such an interest is to diminish appreciably the value of the contract in the owner’s hands.”
The Saga Continues
It was decided by Holmes and the remaining judges that life insurance, much like stocks and bonds, was equivalent to physical property. Thus, you can do with it as you like. This includes selling it if you see fit.
Since the enforcement of that decision, the life insurance arena has seen similar instances including one in 1996. Then-president Bill Clinton signed the Health Insurance Portability and Accountability Act (HIPAA) into law. The Act allows you or your beneficiaries to transfer ownership of an insurance plan to a third party.
An Industry Like You’ve Never Seen
The life settlement process may have begun in 1911, but the industry surrounding it wasn’t created until the 1980s when the AIDS epidemic in America was at its peak.
Many AIDS victims were given very short life expectancies. Many of them owned life insurance policies that they now had no use for, and they sought to sell their policies and garner quick cash to pay their crippling medical bills.
This gave way to what’s known as a viatical settlement, a separate division of the life settlement space. Viatical settlements can occur when you have a chronic or terminal condition, and your life expectancy is less than two years. You can sell your life insurance policy to a third party for a single lump sum. Instead of receiving monthly payments or annuities, you receive one payment. The new owner of your policy is responsible for paying the remaining monthly premiums and thus receives the benefits of the insurance plan once you pass away.
The primary differences between a life settlement and a viatical settlement are the ages and the conditions associated with them. With a life settlement, you are likely between the ages of 65 and 70, and you are not facing a low life expectancy. With a viatical settlement, you can be any age, and you’re likely suffering from a severe illness.
Some Updates to the Space
Today, the market surrounding both life and viatical settlements is regulated by government officials. Approximately 42 states regulate life settlement processes and provide insurance protection to roughly 90 percent of Americans. About 31 states have enforced a two-year waiting period for individuals looking to sell their insurance policies between the times of issue and the actual sales. Ten states require a five-year waiting period, while Minnesota is the only state requiring four years.
Each state also has separate eligibility requirements, so it’s essential to research the laws of your state before initiating a life settlement process.
Need to Sell Your Life Insurance Policy?
Life settlements are over 100 years old, yet they remain a solid option if you’re strapped for cash. If you’re entering your golden years and you want some fast money to help you enjoy those years, a life settlement may be a solid option for you.
That’s where we come in. We are Harbor Life, and for over a decade, we’ve been helping people just like you get cash fast for their unwanted or unnecessary life insurance policies. Our qualified experts have years of experience finding the right providers willing to buy out unwanted plans, and we know we can do the same for you.
Give us a call or send us an email today for a free consultation. Deciding whether to sell your life insurance can be a crucial (and tough) decision, so it’s good to consult with someone who knows this industry. We hope you’ll consider us in your pending life settlement decisions.
We look forward to speaking with you soon.