Wis. Admin. Code Office of the Commissioner of Insurance, ch. Ins 2, app II
WISCONSIN GUIDE TO UNDERSTANDING LIFE SETTLEMENTS
Keep this information with your insurance papers
Thinking about selling your life insurance policy? Life insurance is a critical part of a broader financial plan. If you are considering a sale of your life insurance you should consult with a licensed insurance or financial advisor, attorney or accountant to find an option best suited to your needs.
What is a life settlement? A life settlement is the sale of a life insurance policy to a third party for a cash amount that is greater than the cash surrender value or accelerated death benefit but less than the expected full death benefit under the policy. The third party becomes the new owner or beneficiary of the life insurance policy, is responsible for paying all future premiums, and collects the entire death benefit when the insured dies.
Questions to ask before you sell your life insurance policy:
* Do I still need life insurance protection?
* Have I discussed all my choices with a professional advisor?
* If I sell my policy how much cash will I get?
* If I sell my policy will I be able to get additional life insurance in the future?
* Is my life insurance provided by an employer or other group policy? If so do I have the right to sell it?
* If I sell my policy, who will be the legal owner? Will the policy be resold?
* Who will have specific personal or medical information about me? How often can medical information be requested about me? Will I be required to permit others to contact my medical providers or family members concerning my medical information?
* Is the broker or provider I plan to work with licensed to do life settlement business in Wisconsin?
* What are the costs and fees?
If you sell your life insurance it is important to know:
* You may have to pay income taxes on some or all of the settlement money you receive. Consult a tax professional.
* Creditors may be able to make claims against the settlement money you receive.
* A cash settlement may affect your eligibility for certain government assistance programs such as Medicaid or food stamps. Consult with the appropriate government agency, such as the county aging and disability resource service.
* Your policy could be resold and future owners may be able to track your health.
How does a life settlement work?
* You may contact a life settlement company directly or choose a broker to help you shop for the highest cash settlement. A listing of Wisconsin licensed life settlement brokers and providers is available at the OCI web site. A licensed broker represents only the policy owner and owes a fiduciary duty to the owner to act according to the owner's instructions and in the best interest of the owner.
* You will complete an application form and sign a release allowing the potential buyer to use your medical records to evaluate your life expectancy.
* You select the best offer from those submitted to you.
* Once you accept a settlement offer an escrow account will be set up to hold your policy and the purchaser's money until the documents that change ownership of the policy and the beneficiary have been received and processed by the insurance company.
* Within three business days after the life settlement company gets written proof that the changes in policy ownership and beneficiary have been processed by the insurance company, the settlement proceeds will be sent to you.
* You can change your mind about the life settlement within 30 days from the date of the life settlement contract or 15 days after you are paid, whichever is earlier. If you cancel the settlement contract, you must return the cash settlement plus any premiums paid by the buyer, and repay any loan and loan interest paid on account of the life settlement. If you die within the period, the life settlement contract is cancelled and the named beneficiaries will receive the death benefit, but any cash settlement funds received plus any premiums paid by the buyer, and any loan and loan interest paid on account of the life settlement must be returned to the buyer within 60 days of the date of death.
* Your contract may require you to allow future owners of your policy to regularly contact you to check your health status.
Consumer tips.
* Comparison shop. Get quotes from several settlement companies and be sure you have the best offer.
* You do not have to accept any life settlement offer. You should decide what is in your best interests.
* Check all application forms for accuracy, especially your personal information and medical history.
* Be cautious of any offer to loan you money to buy life insurance. Ask what strings are tied to the loan, and what will happen if the loan is not repaid.
* Stranger-originated life insurance is prohibited. Contact the Office of the Commissioner of Insurance if you are offered any money or a gift to purchase life insurance, or if you are offered "free" life insurance for a period of time, or if you are asked to purchase life insurance for the purpose of selling it to investors.
Questions or complaints? Contact your insurance company or agent:
(Insurer Name)
(Customer Service)
(Address)
(Toll free telephone number, if available)
(Telephone number)
You may also contact the Wisconsin Office of the Commissioner of Insurance at 1-800-236-8517 or 608-266-0103; Email: ociquestions@wisconsin.gov.
Wis. Admin. Code Office of the Commissioner of Insurance, ch. Ins 2, app II