In a life settlement, a senior sells an individual or group life insurance policy to a third-party buyer for a single cash payment. It’s an attractive strategy for underfunded retirees because the net proceeds are usually higher than the policy’s surrender value. For the senior who’s already considering surrendering life insurance, if only to get out of paying the premiums, a life settlement can provide a much higher cash value.
As these transactions grow in demand and popularity, so do the number of companies offering services related to life settlements. That can create a lot confusion about the role these service companies offer and which company might be best suited for your situation. Hopefully, we can help. Harbor Life Settlements created this list of the top life settlement companies to help you choose the right partner to maximize the sales price of your life insurance.
What is a life settlement?
A life settlement is the sale of your life insurance to a buyer, called a life settlement provider. The provider pays you cash and takes over your policy, including responsibility for premium payments and ownership of the death benefit upon your eventual passing. You can sell the policy directly to a provider, or you can work with a broker to have multiple providers bid on your policy. Bidding naturally drives the price higher, which is why brokers tend to generate the highest proceeds for selling policyholders.
To qualify for a life settlement, you must be 65 years old and the owner of a sellable life insurance policy. Many policy types qualify, including individual life insurance, group life insurance, most permanent life policies, and even convertible term policies. If you are younger than 65 but terminally or chronically ill, you may alternatively qualify for a viatical settlement — a related transaction type that also results in the sale of your policy for cash.
What does a life settlement company do?
The key parties in a life settlement are the policyholder — that’s you — plus the life settlement provider, life settlement broker, and the life settlement company. As noted, the life settlement provider is the buyer. The broker is responsible for presenting your policy to providers, inviting those providers to participate in a competitive bidding auction, and then managing multiple rounds of bidding to get the highest offer.
The life settlement company brings these parties together and manages a cohesive life settlement process. Normally, the first steps for the life settlement company are to prequalify and then underwrite your policy. Next, your life settlement company presents the policy to brokers, which frees you up from managing the details and allows the broker to focus on negotiating the highest price for your life insurance asset. Finally, the life settlement company reviews the offers with you and guides you through the closing process.
Top life settlement companies
As you look for potential life settlement partners, it can be unclear if a particular company is a broker, provider, or life settlement company. But it’s critical to differentiate these roles. Brokers and providers, for example, have very different motivations. A broker wants to get the highest price possible which is why they’ll seek multiple offers. On the other hand, providers want to get you the lowest price possible (they want to buy your policy for the lowest amount to increase their return on your policy). It’s also useful to know which brokers are actually subsidiaries of providers. That could influence how much marketing and attention your life insurance will receive, which ultimately affects your net sales proceeds.
Also, because selling your life insurance policy is a major financial decision, you might appreciate a certain level of hands-on guidance and support from your partner. You can expect that from a broker to some extent and from a life settlement company, but less so from the provider.
Harbor Life Settlements
Harbor Life Settlements is a life settlement company that offers both life settlements and viatical settlements. Our team has more than three decades of industry experience, with a focus on education and transparency. You need to feel comfortable that you have all the information you need to make the right decisions about your life insurance. We’ll provide you with a free policy estimate, educational resources, answers to all of your questions, and then work to get you an offer that could potentially be up to 60% of your policy’s cash value, with no hidden fees.
You should also know that Harbor Life works with the top life settlement brokers and providers in the industry, including our partner Suncrest Benefits and its revolutionary online auction platform. You could work with these companies on your own, but you’d have to fill out multiple applications and request multiple sets of HIPAA forms and medical records. We can streamline this process for you by submitting your policy to our network of premium providers. As a result, you get more offers and, ultimately, higher cash proceeds by working with Harbor Life Settlements directly.
Find out how much your policy is worth.
Mason Finance was founded in 2017 and was acquired by Magna Life Settlements in 2019. Magna Life Settlements is a life settlement provider that’s owned by Vida Capital, Inc., a multibillion alternative asset management firm. Magna Life describes itself as being vertically integrated with Vida Capital, which means Magna supplies Vida with life insurance assets. That’s an efficient structure for the organization, but it may not work to your advantage. If your policy is only presented to a single buyer like Vida and there’s no competitive bidding process, it can result in lower cash proceeds.
Coventry Direct is part of the Coventry First group of companies. Coventry First was founded in 2000 and has been a prominent life settlement provider and industry advocate for years. According to its website, Coventry First has purchased more than $3.5 billion in life insurance policies, which has funded retirement living expenses, healthcare expenses, and long-term care for seniors around the country.
Note that Coventry First does resell life insurance on the tertiary market at a profit, so there’s a natural motivation to keep purchases prices low. That may be a factor to consider if Coventry Direct only presents your policy to its affiliate provider, Coventry First.
Abacus Life Settlements
Abacus Life Settlements is a provider that buys life insurance policies directly and through brokers. The company was established in 2004 and has since purchased more than $10 billion worth of life insurance. Abacus is licensed in all U.S. states except Nebraska, North Dakota, Washington, Wisconsin, and Vermont.
Abacus Life Settlements is one of the providers in Harbor Life Settlement’s network.
Windsor Life Settlements
Windsor Life Settlements is a life settlement broker that works with policyholders as young as age 60. This is a differentiator, since it’s more common for brokers to limit their clients to seniors aged 70 or older. The company is transparent about what it does and how it gets paid. Windsor Life also provides a nice range of educational content about life settlements on its website. The Chicago-based company has been in business since 2013.
Ovid Life Settlements
Ovid Life Settlements is an online platform that connects policyholders directly with sellers. That takes a middleman out of the process, but it also leaves you on your own to manage the technology and understand the details of the transaction. You won’t have an advocate on your side, available to explain things or answer questions. You might prefer that if you’re naturally independent and would rather work through the settlement on your own. This model isn’t right for you, though, if you’d feel more comfortable with some guidance along the way.
Policyholders who go through Ovid Life net proceeds are averaging 22% of the policy’s face value. Note that Ovid Life Settlements is owned by a subsidiary of Coventry.
Institutional Life Services (ILS)
ILS is a life settlement provider that’s licensed in 41 states, plus Washington, D.C. and Puerto Rico. The company is forthright about its commitment to investor clients; it offers them a range of related services such as policy servicing, valuation, premium optimization, and longevity risk assessment. Investors fund life settlements with the goal of turning a profit, so they naturally prefer to keep sale prices low — that obviously works against your objective to get the highest possible proceeds for your policy.
One positive differentiator for ILS is that the company accepts policies with face values as low as $50,000. Most providers focus on policies worth $100,000 or more.
ILS was founded in 2007 by Goldman Sachs and Genworth Financial. In 2016, the company was purchased by its own management team.
Welcome Funds is a life settlement broker with deep industry experience and a strong network of buyers. The company was founded in 2000 and maintains an extensive database of historic transactions that can be used to evaluate the strength of new offers on your policy. Life settlements closed by the Welcome Funds team in the first six months of 2020 have averaged 25.96% of net death benefit paid to sellers, with 11 bids per closed policy.
One negative is that Welcome Funds website is somewhat outdated and doesn’t cover the basics of life settlements as well as other companies do.
Q Capital is a life settlement provider. The company was founded in 2004 and its management team has decades of experience in the life insurance and life settlement industries. Q Capital differentiates itself with a focus on technology; the company has developed an innovative software platform called QUOTE that can process, analyze, and price policies quickly. You can actually get a quote on your policy from Q Capital by answering just three questions. That’s an easy reference point, though the quote may be different from the actual offers you receive since it is based on limited information.
Q Capital is part of Harbor Life Settlements’ provider network.
Habersham Funding is a provider that’s licensed to buy life insurance in all states except Alaska, Florida, and West Virginia. Habersham Funding was founded in 2001 by a licensed insurance agent who completed his first life settlement in the late-1980s. The company is based in Atlanta, Georgia.