Tag: viatical

What Is An In-Force Illustration?

Every year more seniors realize the benefit of exploring a life settlement to get an immediate benefit from an unneeded life insurance policy. As settlements become a more popular option, consumers are realizing that they can investigate and enter into life settlements themselves if they choose, without going through an advocate. But to go through that process, they must first understand the steps of a life settlement and define the terms of the industry. One of the most important steps is obtaining an in-force illustration.

obtain inforce illustrationAn in-force illustration might sound like a concept only understood by insurance professionals, but in fact it is quite straightforward and a critical step in the life settlement process. After a person over the age of 65 does preliminary research into a life settlement using Magna’s simple calculator or through a phone call with a Magna settlement advisor, the next step is to obtain an in-force illustration from the insurance provider and submit it to Magna.

Magna Life Settlement Calculator

How can you obtain an in-force illustration?

Call your insurance carrier with Magna

Magna can help you gather an in-force illustration from your life insurance carrier. First, schedule a time for a Magna Case Administrator to call you. Together, we will contact your life insurance carrier to request an in-force illustration.

Call your insurance carrier and request an in-force illustration

Or you may call your insurance carrier by yourself. On the call with the insurance carrier, please request the following type of in-force illustration:

“Solve for minimum level premium to maintain the death benefit through maturity, solving for $1,000 of account value at maturity.”

Important facts about the in-force illustration

Projects the future costs of premiums

It projects the future costs of premiums through maturity of the policy, allowing a policyholder to accurately compare the costs and benefits of keeping a policy versus selling it in a settlement.

Comes from the life insurance carrier at the request of the life settlement provider

The in-force illustration finds the minimum premium liability until the policy matures (typically at age 100) and the net value of the policy is $1,000. Because the illustration uses current interest rates, it often produces results very different from the projections at the time when the policy originated.

It is a valuable tool for both consumers and settlement providers

Our Magna life settlement provider will schedule a call with a client, and together they will call the insurance company to request the in-force illustration. The results will inform both the client and Magna’s representatives about the suitability of a life settlement, and if the client decides to move forward the next step is a comprehensive review of the policy and an informal offer from Magna.

In-force illustrations are valuable for anyone with a life insurance policy

They keep consumers informed and eliminate unwelcome surprises if interest rates and premiums go up. But for those considered a life settlement, these illustrations are a critical step that illuminates the costs and benefits of holding onto a policy versus selling it for a cash windfall. Schedule a call with  Magna’s life settlement expert today to learn more.

Accelerated Death Benefit Versus Viatical Settlement: Which Is Best For You?

accelerated death benefitHearing the news that a loved one is facing a terminal diagnosis is stressful for everyone in the family, and unfortunately financial concerns can also come into play along with the prospect of impending loss. What are the options for a terminally ill senior facing mounting medical or care expenses? Can a life insurance policy be leveraged to help meet that need?

There are two different options allow a policyholder to get cash out of a life insurance policy that might not be needed anymore. Both viatical settlements and accelerated death benefits could offer financial relief to families facing a difficult diagnosis, but the two agreements are different in several key ways.

Accelerated Death Benefit

An accelerated death benefit (ADB) is a provision attached to some life insurance policies that allows consumers to borrow against the value of the death benefit in the event of a terminal illness. The ADB, which comes in the form of a cash advance, is generally tax-free if the expected life expectancy of the policyholder is two years or less.

Generally an ADB is laid out as one of the features of a policy when it is originally issued, but according to some experts most insurance companies will consider providing the benefit if the policyholder meets the requirements, even if it wasn’t originally part of the policy. According to a January 2018 article on Investopedia, individuals may be eligible for an ADB if they meet one of the following criteria:

  • Diagnosis of a terminal illness with life expectancy of two years or less
  • Diagnosis of any serious illness that will reduce expected life span
  • Need for an organ transplant because of serious illness
  • Enrollment in hospice care

In most cases, a policyholder who accelerates his or her death benefit to help defray expenses only borrows against part of the policy, leaving a reduced death benefit that is still available for the original beneficiary. For example, if an individual with a $1 million life insurance policy needs funds for health care, he could borrow against half of that policy, receiving an offer of $265,000 cash against $500,000 of life insurance. That would leave $500,000 to go to his beneficiary upon his death.

Viatical Settlement

 A viatical settlement is a type of life settlement, but generally viatical settlements are reserved for those who have been diagnosed with a chronic or terminal illness. A terminally ill person is defined, for tax purposes, as one whose physical condition will be reasonably expected to end in death within twenty-four months of certification. A chronically ill individual is one who has been certified by a healthcare professional with either a substantial physical or cognitive impairment.

In a viatical settlement, a life insurance policy is sold to a third party for a lump sum, and the buyer assumes the premiums and receives the death benefit when the seller dies. The proceeds from a viatical settlement are generally exempt from federal taxation, because the Internal Revenue Service considers the payout to terminally ill individuals to be taxed in the same way as a benefit upon the death of the insured. In the case of someone who is chronically ill, the settlement proceeds can be tax exempt if the funds are used to cover certain health care expenses.

How to Determine Which is Best?

If a terminal illness has caused a financial strain, a life insurance policy can become an asset while the policyholder is still alive, but the individual will need to research the details of his or her policy to determine which type of transaction is better and more profitable for the situation. Sorting out the best path to help provide financial help to a family suffering a health crisis can be stressful, and a trusted advisor could help make sense of the situation and lay out the potential advantages of either path.

The first step, for any individual or their advisor considering the two options, is to determine whether the original policy included an ADB and whether the provider is willing to negotiate one if it isn’t laid out in the original terms. On the other hand, a viatical settlement usually requires documentation of a terminal diagnosis, so if such evidence is not available an accelerated death benefit might be the right choice.

The experts at Magna Life Settlements stand ready to advise anyone who thinks they might be eligible for a viatical settlement and answer any questions about the process involved in the sale. Set up a call with Magna today to ensure the best possible advice for your family through the illness of your loved one.

*Comments provided in this post are for informational purposes only and should not be construed as financial, legal or tax advice, recommendations or solicitations. Please consult your financial, legal or tax professional with questions related to the information presented, or for advice as to whether a life settlement is right for you.

What is a Life Settlement? [2019 Guide]

In many circumstances, a life insurance policy is an important investment that can benefit those left behind when a loved one dies. Many financial advocates would recommend life insurance to a client, but those same advisors understand that the efficacy of life insurance often runs its course. What alternatives exist for older policy holders who are still paying premiums despite the fact that their needs have changed and they don’t really need the policy anymore? It is possible that those individuals can sell their life insurance policy for cash value through a life settlement, in which a third party buys an unwanted insurance policy in exchange for cash. Here are some facts about the life settlement option:

The History Behind The Life Settlement Industry

The origin of life settlements dates all the way back to a 1911 Supreme Court case called Grigsby v. Russell. In the 1980s sellling an unneeded life insurance policy for cash became a way for people with diminished health to obtain funds for medical and living expenses. In the years since, legislation and tax laws have created a more favorable climate for consumers looking for options when an insurance policy is no longer needed. Statutes passed in the last five years now mean that 90 percent of Americans are protected by comprehensive life settlement legislation.

What Are The Benefits Of Selling My Life Insurance Policy?

The retirement years are costlier than ever, both because of the rising price of health care and the uncertainty of government resources like social security. A life insurance policy is an asset that can outlive its usefulness; the original beneficiary might not need the proceeds anymore, or the premiums have become burdensome. Under these circumstances, it is worthwhile for a senior to explore an option that can free up cash in the sale of that unwanted policy. Besides the obvious cash windfall, a life settlement also eliminates the premium payments that have depleted even more of a retiree’s limited resources.

Do I Qualify?

Two key variables dictate whether an individual would benefit from a life settlement: the policy holder’s level of health impairment and the cost structure of the policy. The two factors are related, where a policy issued with a higher rating combined with a poor health prognosis can result in a promising settlement offer. For example, if a universal life policy was issued at preferred-plus and the policy holder becomes significantly more impaired than predicted, a life settlement would provide a payout higher than the stated cash surrender value. Some policies are not a good fit for a settlement, and the owner may be better off to either surrender their life insurance policy for cash value, borrow against the policy’s value, or negotiate another option with their carrier. To find out whether a life settlement might be a good fit for you, visit Magna Life Settlement’s simple calculator.

What Are The Steps To Sell My Life Insurance Policy?

Because a life settlement can provide a significant cash payout to help pay for retirement expenses, no one should miss that opportunity simply because they don’t understand the life settlement process. As the word gets out about the potential upside of life settlements, seniors who are likely to benefit from these transactions need guidance about how it works and how to start the process. Here are the basic steps of a life settlement:

1. Determine your eligibility. Using Magna’s calculator, first determine whether your medical status and the specifics of your policy make you a good fit for a settlement.

2. Submit an in-force illustration. With the help of a Magna case administrator, you will request an illustration from your life insurance carrier that spells out what the minimum premium costs would be if you kept the policy until it matures – typically at age 100 – and if the net policy account value at maturity was $1,000. This allows us at Magna to determine how much your policy may be worth.

3. Submit additional healthcare data. At this point, you will fill out a HIPAA form protecting your privacy and submit your health data. This also helps us to determine how much your policy may be worth.

5. Wait for Magna review and informal offer. Then, your Magna representative will calculate the value of your policy and decide whether or not to make you an informal offer, pending the next steps of information gathering.

6. Magna obtains medical records and life expectancy report. These reports verify your policy value so that Magna can calculate an offer that pays out the maximum amount for your policy.

7. If your policy qualifies, Magna extends a formal offer. If you accept the offer, you will receive cash in exchange for the sale of your policy after the sale is complete. This closing process takes some time. Similar to buying a house, a life settlement involves signing contracts.

8. Magna takes over the policy. After the settlement transaction closes, Magna is responsible for paying all future premiums and receives the death benefit once the policy matures.

If you are interested in receiving a personalized life settlement estimate or have questions about the process, contact a Magna representative today.

*Comments provided in this post are for informational purposes only and should not be construed as financial, legal or tax advice, recommendations or solicitations. Please consult your financial, legal or tax professional with questions related to the information presented, or for advice as to whether a life settlement is right for you.

How A Life Settlement Impacted My Family

Years before he joined the life settlement industry, Magna’s Senior Vice President Clay Gibson was impacted by his grandfather’s decision to sell his life insurance policy. In a personal essay, Clay shares how his grandfather’s life settlement made an impact on his family.

“My grandfather was in his late ‘70s in 2002 and even though he had some minor health issues he realized he was likely to live for quite a few more years. Decades earlier he had taken out two life insurance policies, each worth $1 million, one in his name alone and one in the name of he and my grandmother. If they held onto the policies, they were going to have to start paying increasingly expensive premiums again.”

Read the rest of Clay’s life settlement story on LinkedIn.

The Impact of Rising COI on the Life Settlement Market

How to Calculate COI - What is COI - Magna Life SettlementsThere was a time when the COI (cost of insurance) charge on a universal life insurance policy was virtually assured to stay stable. Those who purchased policies looked at historical trends and concluded that their premiums weren’t likely to go up because of an increase in COI, defined as the amount a policyholder pays to cover the value of the death benefit.

According to the Department of Financial Services a COI is the premium rate for a life insurance policy is based on two underlying concepts: mortality and interest. A third variable is the expense factor which is the amount the company adds to the cost of the policy to cover operating costs of selling insurance, investing the premiums, and paying claims.

But the landscape has changed, and universal policy owners find themselves in a season of uncertainty about COI and, consequently, the potential roller coaster trend in their premiums. In a recent presentation at a Life Insurance Settlement Association conference, QuantRes consultant Matthew Sheridan spoke about the uptick in COI and presented a model predicting which types of policies are most likely to be hit by the increases in the coming years.

According to Sheridan, his predictive model suggests that older, underpriced policies are the most likely to be hit with COI increases. It’s a trend with several different repercussions for those who sell or buy insurance policies on the life settlement market, including:

More interest in life settlements from policyholders

When COIs rise and premiums go up accordingly, seniors who are already living on a limited budget are often more likely to look into a settlement as a way to unload those premiums and bring in extra income. A life settlement isn’t the right answer for everyone, but anyone with a burdensome policy should calculate their potential eligibility for a settlement.

A movement away from universal policies

Consumers and investors alike are concerned about the stability of universal life policies due to the unpredictability of the COI increase trend. This upturn has led to more careful examination of different types of policies in search of more stable cost structures. If universal policies become less popular, the providers might respond to market forces and make moves to stabilize COI.

Our Magna life settlement experts stand ready to answer policy owners’ questions about their rising premiums and the best options for turning a burdensome policy into a needed financial windfall. To find out if the sale of your policy might be right for you, schedule a call with a Magna specialist today.

How Selling Your Life Insurance Policy May Help Your Retirement

retirement calculatorPlanning for your retirement can be a daunting experience. There is so much to think about, especially the amount of money you need in order to retire comfortably. Generally, the rule of thumb is that the money you may need when you ultimately retire should fall somewhere between 70 to 85 percent of your income. 

To estimate how much money you may need for your retirement years, you could estimate approximately how much you would be spending in the future. There are certain expenses you probably won’t have to worry about once you’re retired, including expenses related to your children. Your mortgage may be paid off, and you may not have to worry about commuting or other work-related expenses. 

At the same time, there could be new expenses, such as healthcare costs. And you may also travel more after retirement since you will have free time that you didn’t have when you were working.

You should maximize your income flow during your working years so that you can be comfortable after you retire. Following are some of the key ways to increase your retirement income.

Retirement Calculator: How to figure out your retirement score:

Social Security Benefits

Avoid withdrawing money from your Social Security benefits until at least the retirement age of 65 or 67 if you were born in or after 1960. If you continue working until 70, you will receive an additional benefit of eight percent for each year you wait to retire after age 65.

Company Benefits

If your employer offers company benefits, you can take advantage of them and choose those that can give you the maximum income after retirement. You can choose the right investments to reflect your age and risks in a 401k plan. Be wise about when you withdraw so that you can get the most benefit from the plan.

Personal Savings

You can use your personal savings toward your retirement income, but the better option is to make deposits to mutual funds, which can give you considerably more money in the future as they grow.

Whole Life Insurance

If you have a whole life insurance policy, borrowing against the cash value and investing the balance can give you more income when you retire.

Reverse Mortgage

A reverse mortgage can benefit you if you are 62 or older. It lets you free equity in your home and ensures that you don’t have to make future payments.

Avoid Debt

Finally, another good way to ensure that you can retire comfortably is to avoid the trap of debt. Be smart when using credit cards and when taking out loans. Always pay the maximum toward your balance on both in a timely manner. Avoiding getting into debt can help you enjoy full control over your finances. You can also live stress-free when your finances are in good condition. As a result, you have a better opportunity to retire with a sense of security.

Sell Your Insurance Policy and Leave a Legacy

Sell Life Insurance - Magna Life Settlements

Some older Americans find themselves looking for a way to leave a legacy and give back to their community during their retirement years. With enough money in hand for retirement and long-term costs, these seniors find that contributing their money to a charity of choice a fulfilling way to spend their retirement dollars.

For retirees who want to give their money to a good cause, a life settlement can be a large benefit because of the difference it can make for others. The sale of an unwanted life insurance policy can provide an unexpected source of income to be used for any need.

Examples of some ways life insurance proceeds can help build a legacy of generosity include:

  • A significant gift to a charity can go beyond its immediate impact to influence younger generations. When an individual donates money from a life settlement to a worthy cause, his children and grandchildren have an example of giving to others that they are likely to model in the future.
  • By liquidating a low-yield life insurance through a life settlement, a retiree can put the money into a high-return fund, directed by an advisor with an eye toward charitable giving. The fund may grow in value and make an even greater impact on selected charities.
  • Life settlement funds can touch the lives of family members and make memories at the same time. Some seniors choose to use their windfall for a special trip for the entire family, creating a once-in-a-lifetime experience that the family might not have enjoyed without those resources.

Some individuals pursue a life settlement because they need help making ends meet or paying for needs like medical care, but others find themselves in a comfortable financial situation and wonder if a settlement is worth pursuing. But since a settlement can help meet a charitable goal and make a difference in the lives of others, even those with plenty of money can benefit from the sale of a policy that has become burdensome.

Would you like to learn more about the endless possibilities sparked by a life settlement? Magna’s life settlement calculator will reveal whether you are a good candidate for a settlement, and a conversation with one of our specialists will help answer your questions about the criteria and the process. Contact us today.

Bill HR 7203 to Allow Life Settlements to Fund Long-Term Care

Bill HR 7203

A new bill being weighed by the U.S. House of Representatives would make provision for the tax-free rollover of life settlement proceeds into tax-free accounts dedicated to long-term care. The bill, H.R. 7203, was sponsored by Rep. Kenny Marchand (R-TX) and referred to the House Ways and Means Committee on November 30.

H.R. 7203, known as the Long-Term Care Account Act, would provide a significant benefit for seniors who are facing the daunting costs of long-term care. If those individuals have a life insurance policy that is no longer serving them, the bill would permit them to easily use the money from a life settlement to fund an assisted care facility, in-home care or other treatments deemed medically necessary.

The provisions of the Long-Term Care Account Act include:

Tax-free transfer of funds

The tax-free transfer of funds from a life settlement into accounts used exclusively for long-term care expenses. That money can be used for long-term care insurance or any “qualified health expenses” that a medical practitioner would recommend to treat health impairments or maintain health for retirees.

– As long as the distributions from life settlements into the long-term care accounts are used for their stated purpose, they will be exempt from any tax. If funds are used for unauthorized purposes unrelated to long-term care, those expenditures will be subject to both income tax and a 20 percent excise tax.

– If the funds distributed to the accounts from life settlements are not spent on long-term care expenses, they can remain in the account untaxed until the death of the account holder and that person’s spouse.

H.R. 7203 is a win-win for seniors

The Long-Term Care Account Act is a win for seniors looking for new revenue sources, pairing the prime opportunity of a life settlement with the pronounced need of long-term care. Rising health care costs during retirement are one of the chief reasons people over 65 investigate life settlements, and the passage of this legislation would link the two in a way that will provide tangible benefits to Americans seeking to make the most of their retirement years.

Please don’t hesitate to urge your elected representatives to support this important bill. For more information about life settlements or the pending legislation’s, you can contact a Magna representative by scheduling a call today.

 

Conning Report Reviews Robust Life Settlement Year

Life Settlement Year - Magna Life Settlements

The face value of total life settlements has increased for the second consecutive year, signaling a promising landscape for the settlement market, according to the 2018 Conning Report released in November. The report, entitled, “Continued Growth, Positive Outlook,” includes an overview of the life settlement market, an examination of the factors that drive settlements and sections covering life settlement insurer performance and the trend toward higher cost of insurance (COI).

The report, which is the thirteenth annual review and forecast of the life settlement market produced by Conning, bodes well for the future of life settlements, despite dampening trends like COI increases. Among the report’s key findings:

Volume of the Life Settlement Industry

The volume of life settlements has increased in the past year, and the growth of the market has brought increased marketing and consumer efforts from life settlement providers.

Legal and Regulatory Developments

Legal and regulatory developments, including the 2018 Tax Cuts and Jobs Act (TCJA) and favorable legislative and court decisions for consumers, have made life settlements and more accessible and profitable option for many.

The drivers that point to future life settlement growth are largely favorable, including economic, capital, consumer and industry drivers.

Life Settlement Ten Year Forecast

The ten-year forecast predicting the future of the life settlement landscape spell continued growth. The ten-year forecasts for both annual gross market potential and annual volume for new settlements both increased from Conning’s 2016 predictions.

As insurers have increased cost of insurance (COI), consumers have seen a requisite rise in premiums, and as a result, life settlement investors might see a drop in investment returns.

For more in-depth analysis of the 106-page Conning report, keep an eye on Magna’s blog as our executives weigh in on the most compelling aspects of the research.

Am I eligible for a viatical settlement?

Am I eligible for a viatical settlement? - magna life settlements

You may be eligible for a viatical settlement if you have an in-force life insurance policy that you’re willing to sell in exchange for a one-time payment. There are companies that specialize in buying life insurance policies from individuals who longer need or want their policies. In such an arrangement, the viatical company becomes the owner and beneficiary of the policy, and the buyer becomes responsible for premium payments. After the sale of the policy, the original owner no longer has any obligations or claims relating to the policy. Once the insured person dies, the viatical company collects the death benefit.

Does a viatical settlement make sense?

A viatical settlement does not make sense for everyone, but for individuals in certain situations, it could provide a much-needed infusion of cash to help with medical or other expenses. If you have a life insurance policy that you’re sure your beneficiaries will not need to rely on, and you are in need of a lump sum of money, a viatical settlement might be suitable. It’s important to understand that the amount you receive in exchange for your life insurance policy can be significantly less than the policy’s death benefit. You’ll also want to discuss any potential tax implications with your tax advisor.

How is my payout determined?

Under a viatical settlement, your payout is determined by the amount of the policy’s death benefit and your expected lifespan. Generally, the longer you are expected to live, the lower your payout will be. This is because the viatical company will have a longer period during which they will make premium payments on the policy – reducing their profitability. You may be required to have a medical examination in order for the viatical company to estimate your expected lifespan.

Choosing an Accelerated Death Benefit or a Viatical Settlement

Some life insurance policies have an accelerated death benefit, which allows the insured person to receive part of the policy’s death benefit while they are still living. Eligibility is usually reserved for situations where the insured person is suffering from a terminal illness. If you’re in this situation, an accelerated death benefit may be optimal, because you are able to retain ownership of the policy while receiving financial assistance. If your policy does not have an accelerated death benefit, or if it does include one and you’re not eligible to activate it, a viatical settlement may be a better option.

Want to learn more about Viatical Settlements? Contact Magna Life Settlements today or use our Life Settlement Calculator.

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