- What is a life settlement?
- Who can sell a life insurance policy?
- Who is a good candidate for a life settlement?
- What life policies have the best potential for life settlements?
- What does Invescor do?
- How is Invescor different from other life settlement brokers?
- What is the difference between working with Invescor and working directly with a provider?
- What licenses do I need to conduct life settlements?
- How do commissions work on a life settlement with Invescor?
- If the policy owner accepts a life settlement offer, who pays the client and when?
- Who pays me and when?
- What if the policy owner changes their mind after accepting an offer?
- Are commissions disclosed to the client?
- How do life settlements work with Invescor? How long does the process take?
- Why does Invescor do an internal valuation on a policy before it goes to the marketplace?
- How can I determine if a client might benefit from a life settlement?
- How do I use the Pre-Qualifying Worksheet? What is it for?
- What steps do you take to ensure client confidentiality?
- What if the client passes away shortly after selling their policy?
- What happens after the client receives their settlement proceeds?
- How often can are these calls made on the insured’s health status?
- What if the client does not want to be contacted about their health status?
- Will the provider call the insured’s doctor to check on the client’s health status?
- Are there options besides selling the policy?
- What other issues should my client be aware of regarding a life settlement?
- How does your Errors and Omissions Coverage work?
- Are policy owners taxed on life settlement proceeds? If so, how would they know of any potential tax liability?
- I want to use a few different life settlement brokers. Why should I do business exclusively with Invescor?
1. What is a life settlement?
A life settlement is the selling of an in-force life insurance policy to an institutional funding source, other than the company that issued the policy, for more than the policy's net cash surrender value, but less than the net death benefit.top
2. Who can sell a life insurance policy?
Only the policy owner has the right to sell the policy, and the policy owner must obtain the consent of the insured and all beneficiaries to execute a life settlement transaction.top
3. Who is a good candidate for a life settlement?
Life settlements are for qualified policy owners who have an unneeded, unwanted or unaffordable life insurance policy.
Generally, the minimum requirements for a good life settlement case involve an insured age 65 or older with an in-force life policy face amount of at least $250,000. The insured should have a life expectancy of between two and 18 years and have experienced a change for the worse in insurability since policy issue. The policy owner should have no catastrophic illness or life threatening condition considered likely to result in death within 24 months.top
4. What life policies have the best potential for life settlements?
Life settlement purchasing companies will buy most types of life insurance including universal, low cash value whole life, convertible term, and survivorship. Universal policies are the most desirable and account for the majority of transactions.
Term must be convertible to universal life (not whole life), and the conversion option should not be within six months of starting the life settlement process.
Survivorship Life policies in which the insured has a serious medical condition have value in the secondary marketplace. In this circumstance, the policy should have a low cash surrender value relative to face amount.
There is currently low demand in the secondary market for Whole Life policies.
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5. What does Invescor do?
We serve as your back office to facilitate the life settlement transaction from the perspectives of compliance, due diligence, and best execution. We provide the services you need to maximize value to your client, the policy owner.
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6. How is Invescor different from other life settlement brokers?
Invescor is licensed in all states and can process both variable and fixed life settlement cases.
In 2008, by creating a competitive offer market in which Invescor processed policy purchases with 13 different life settlement providers, Invescor generated an increase of 622% over the cash surrender value for policy owners. This 622% increase over the cash surrender value was after all commissions were paid.
This degree of best execution is possible by shopping cases to multiple qualified providers and financing entities, then negotiating the highest offer.
We have conducted thorough due diligence on more than 22 providers to which we place life settlement cases for potential bids. The depth of our due diligence on these providers and the numbers of providers with which we work helps ensure best execution on behalf of your client.
LifeSettleWare® is Invescor’s proprietary software providing you with immediate, real-time case status including all bids, counter offers, declinations, and rejections. Through LifeSettleWare®, all case files and records are in one place and you have 24/7 access.
Invescor’s life settlement business practices are fully transparent, fully disclosed, and fully compliant.
Our experienced and knowledgeable staff will guide and support you through the entire life settlement process.
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7. What is the difference between working with Invescor and working directly with a provider?
Invescor’s job is to get the policy owner the highest possible price.
The provider’s job is to negotiate the lowest price.
Invescor packages your client’s policy and all the information needed by potential bidders so your client will have the best opportunity to receive the highest offer for their policy from a competitive cross section of the marketplace.
Invescor then negotiates on your client’s behalf to achieve best execution.
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8. What licenses do I need to conduct life settlements?
Life settlement regulations and licensure requirements vary by state. All agents and registered representatives conducting settlement business with Invescor, Ltd. must have, prior to client solicitation:
- At minimum, a life license in your resident state and the state in which the policy owner resides; and,
- In states that require life settlement licensing, the agent/registered representative must also hold a life settlement license in the state in which the policy owner resides; and
- If the settlement case involves a variable life insurance policy, the rep must have at least a FINRA Series 6 (or Series 7) and 63, and must be associated with a broker-dealer that has a service agreement with Invescor.
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9. How do commissions work on a life settlement with Invescor?
The commission earned by the agent is based on:
- the maximum commissions available as established by the life settlement provider with the highest offer; or,
- the maximum amount permitted by state and/or federal law
For agents/reps that are appointed with a broker-dealer affiliated with Invescor, their compensation and payout procedures will vary depending on the terms of the broker-dealer service agreement with Invescor.
Invescor’s fee is based on the gross offer made to the policy owner. We have a sliding scale through which, the higher the gross offer, the lower the Invescor percentage. Invescor’s breakpoint commission schedule is clear, consistent, applies to all life settlements conducted through Invescor and reflects our commitment to fully transparent and fully disclosed transactions.
When your client has multiple policies that are sold at the same time, Invescor extends a volume discount – one aggregate fee based on the total gross offer of all policies sold together. That makes more settlement proceeds available to your client. This one aggregate fee for Invescor’s life settlement back office services on multiple policies applies even when even when multiple providers are involved.
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10. If the policy owner accepts a life settlement offer, who pays the client and when?
Invescor requires all providers with which it does life settlement business to use an independent third party escrow agent to handle funds to be paid to the client. The client is sent the settlement proceeds within three business days of the date the insurance company confirms to the provider that the transfer of ownership has been completed.
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11. Who pays me and when?
Invescor releases commission funds on a bimonthly payout cycle.
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12. What if the policy owner changes their mind after accepting an offer?
The client can cancel (or rescind) the life settlement transaction at any time up to the end of the rescission period required by state law. Rescission periods generally run 3-15 days. The client will have to return any funds that the provider paid for the purchase of the policy and possibly any premiums the provider paid to keep the policy in-force.
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13. Are commissions disclosed to the client?
Yes. Invescor fully discloses all commissions and fees to the client. Invescor uses two disclosure forms to ensure the policy owner is fully informed on a timely basis as to the commissions paid to all parties. Full transparency and full disclosure work in the interest of all involved.
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14. How do life settlements work with Invescor? How long does the process take?
The process takes about four months from start to finish (see Life Settlement Process/Workflow Sheet). The major steps include:
- Agent/rep completes the settlement application, HIPAA Release, and Insurance Information Request forms, then forwards to Invescor.
- Invescor orders medical records (takes 2-3 weeks).
- Invescor then orders life expectancy reports and sends the case file to all appropriate life settlement providers (takes 1-2 weeks).
- Invescor manages the bidding process to obtain the best offer (takes 1-2 weeks).
- Upon client acceptance of best offer, Invescor orders contracts from the provider, reviews them, and forwards closing documents to the agent/rep (takes approximately 1 week).
- The agent/rep works with the client to complete all the documents. Invescor reviews for accuracy and completeness, then forwards to the settlement provider (takes about 2 weeks).
- The settlement provider reviews the documentation and conducts a verification of coverage. The file then proceeds to change of ownership and change of beneficiary. Upon receiving confirmation of these changes being processed, the escrow agent wires the funds to the policy owner, and, after the rescission period, wires funds to Invescor to pay commissions (takes 2-3 weeks).
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15. Why does Invescor do an internal valuation on a policy before it goes to the marketplace?
The valuation is a starting point to determine the policy’s potential value in today’s secondary marketplace. Knowing the worth of this financial asset enables us to ascertain whether providers are offering fair prices.
Invescor uses third party actuarial software designed by the leading actuarial firm in the industry. The software reengineers the carrier’s illustration to determine its current value in the marketplace based on client life expectancy and return on investment to the funder.
If offers fall substantially below the valuation, the policy owner may want to consider other options. If offers come in substantially higher than the valuation, the client can feel confident that they are getting a fair value.
Invescor’s policy valuations are for internal use and shared only with the agent/rep.
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16. How can I determine if a client might benefit from a life settlement?
Life settlements are for clients who have an unneeded, unwanted, or unaffordable in-force life insurance policy. A life settlement might make sense if:- Policy premium cost has become prohibitive
- Policy performance has not met projections, and may require additional premium to support the death benefit
- Primary beneficiary named in the policy predeceases the insured
- Policy owner is divorced and the beneficiary was his/her former spouse
- Corporate buy-sell agreement was established; one of the partners has died, left the company, or retired
- Retirement of a key executive from the firm that insured his or her life
- Level term policies in which the conversion period is expiring
- Premium costs for existing term life insurance have increased beyond affordability
- Insured’s estate has been reduced in size and tax burden has been reduced
- Estate tax exclusion allowance has increased thereby lowering the amount of insurance needed to pay the estate tax liability
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17. How do I use the Pre-Qualifying Worksheet? What is it for?
This worksheet helps you analyze if you have a potentially viable case for life settlement.
The Pre-Qualifying Worksheet assesses cases from a marketability point of view – not from a suitability perspective.
You should thoroughly review suitability requirements to ascertain if this is an appropriate potential transaction based on your client’s financials, insurance needs, and tax perspective.
The Pre-Qualifying Worksheet is not an absolute qualifier. If the policy has unique features or the case has some special considerations, call or email your Invescor marketing specialist, who will discuss the particulars of the scenario or product design.
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18. What steps do you take to ensure client confidentiality?
Invescor aggressively protects the personal health information and personal financial information of all clients. Invescor requires that any financial, medical, or personal information obtained about your client, including family members, spouses or significant others, is not shared unless the client has given written approval.
Invescor only solicits offers from providers on cases that fit within their purchase parameters specified by each purchaser. This further protects client privacy by ensuring that case files are shared only with those purchasers that have a reasonable potential of making offers on the case.top
19. What if the client passes away shortly after selling their policy?
If the client dies at any time up to the end of the rescission period, the settlement contract automatically cancels (is rescinded). The death benefit will then revert to the original beneficiary. The provider will pay the policy owner’s contract-designated beneficiaries any proceeds it received from the policy, minus any money it already paid for the purchase of the policy and possibly any premiums paid to the insurance company to keep the policy current.
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20. What happens after the client receives their settlement proceeds?
The provider or a servicing company will call the insured or a designee on a predetermined timeframe to check on the insured’s health status.
Providers have different rules regarding tracking the insured’s health status, but they have to adhere to state regulations.
Some providers utilize Social Security system data sources as an additional means to track the insured.
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21. How often can are these calls made on the insured’s health status?
State regulations on these tracking procedures vary, but in general the former policy owner or their designee can be contacted no more than once every three months if the insured has a life expectancy of more than one year, and no more than once per month if the insured has a life expectancy of one year or less.
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22. What if the client does not want to be contacted about their health status?
The client can appoint a designee to be contacted on their behalf. That designee must be in regular contact with your client and must give the provider their contact information. Once the provider has the designee’s information, the provider cannot contact your client unless it is unable to reach the designee for more than 30 days.
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23. Will the provider call the insured’s doctor to check on the client’s health status?
The HIPAA release form gives your client’s permission to their doctor to share the insured’s medical information with the provider.
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24. Are there options besides selling the policy?
Yes. The policy owner’s insurance company may offer options such as accelerated death benefits, loans, and withdrawals.
Before entering into a life settlement, the policy owner should thoroughly explore these and other options.
The objective of a life settlement option conducted through Invescor is to get the policy owner the highest offer possible above the cash surrender value.
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25. What other issues should my client be aware of regarding a life settlement?
Your client may incur tax consequences.
The insured’s eligibility for various government programs may be affected.
Life settlement proceeds could be accessible by creditors, personal representatives, trustees in bankruptcy, and receivers in state or federal court.
Your client should consult with legal and financial professionals to assess thoroughly the effects of a life settlement particular to their situation. An attorney, accountant, estate planner, financial planning advisor, and/or tax advisor will have helpful perspectives on your client’s financial and legal issues.
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26. How does your Errors and Omissions Coverage work?
As standard procedure upon submission of a life settlement case, Invescor adds the agent/rep to its Errors and Omissions coverage. The agent/rep is covered regardless of whether the case is funded. Our policy provides Invescor with $5,000,000 in coverage per wrongful act and $5,000,000 in aggregate coverage. Individual agents/reps have a $1,000,000 per occurrence coverage limit under the Invescor policy. In all of our life settlement transactions, Invescor provides this additional level of service, combined with its ongoing adherence to regulatory standards, and commitment to transparency.
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27. Are policy owners taxed on life settlement proceeds? If so, how would they know of any potential tax liability?
The sale of a life insurance policy may be a taxable event. On May 1, 2009, the IRS issued Revenue Ruling 2009-13, which defines an individual policy owner’s tax liability on the proceeds from the sale of a life insurance policy in a life settlement transaction.
Upon the sale of a cash value life insurance policy:
- The recognized gain is the difference between the net amount to client and the policy owner’s adjusted basis.
- The adjusted basis is determined by subtracting the cost of insurance from the total premiums paid. This amount is received tax free as a return of cost basis.
- Any recognized gain greater than the adjusted basis and less than the policy's cash surrender value will be taxed as ordinary income.
- Any recognized gain above the policy's cash surrender value will be taxed as a capital gain.
In the sale of a term policy:
- The premiums paid and the cost of insurance are both assumed to be equal, which means the adjusted basis will always be $0.
- Any recognized gain will be taxed as a capital gain.
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28. I want to use a few different life settlement brokers. Why should I do business exclusively with Invescor?
Higher offers do not result from multiple brokers presenting the same policy to the same providers. Using multiple brokers delays the process and may even restrict market interest in the policy.
Most providers assess policies on a first come, first served basis. Presenting the same policy a second, third or fourth time is not relevant to providers and makes no difference in their decision to make an offer. Many providers simply refuse to review files presented from multiple brokers.
When a policy lands at a provider more than once, provider confidence erodes as to whether the client is serious about selling their policy and whether the agent/rep understands how the life settlement marketplace works or has control of the case.
Multiple presentations of the same policy can prompt provider suspicion to potential money-laundering tactics and those attempting to commit fraud.
What matters is how a life settlement case is prepared, packaged and presented the first time. Invescor gets the policy in front of the maximum possible number of qualified providers, at the right time, in the right manner.
An exclusive back office and brokerage relationship with Invescor means one-stop service that includes:
- Processing both fixed and variable life settlement business
- Internal valuations to gauge policy market value
- Getting the case in front of up to 19 qualified providers
- Managing negotiations to get the best offer
- Maintaining all case information in one place with 24/7 access – LifeSettleWare®
- Full disclosure
- Full transparency
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