What Is A Life Settlement Provider

Rebecca Parson
Rebecca Parson

Rebecca Parson

Author

Rebecca Parson is a financial and tech writer with 10 years of experience writing about topics such as life insurance, commodities investing, and the SaaS industry. She has a master’s degree from Johns Hopkins University and a bachelor’s degree from the University of Mary Washington. Her writing has appeared at money.com, sacbee.com, cart.com, herodevs.com, blanchardgold.com, and more.

Brian OConnel
Brian OConnel

Brian O'Connel

Contributor

Brian O’Connell has been a contributing writer for U.S News & World Report since 2016. A former Wall Street bond trader and the author of two best-selling books; “The 401k Millionaire” and “CNBC’s Creating Wealth”, he has 20 years experience covering business news and trends, particularly in the business and financial sectors. He believes education is the best gift a financial consumer can receive – and brings that philosophy to every story he writes. His byline has appeared in dozens of top-tier national business publications, including CBS News, Bloomberg, Time, MSN Money, The Wall Street Journal, CNBC, TheStreet.com, Yahoo Finance, CBS Marketwatch, and many more.

By Rebecca Parson, Brian O'Connel
Author, Contributor, Life Insurance

A life settlement provider is a licensed professional or company that facilitates the sale of an existing life insurance policy from the policyholder to a third-party investor. These providers are responsible for conducting the entire process of a life settlement transaction and ensuring that it complies with state regulations and industry standards.

Life settlement providers are experts in the complex and highly regulated industry of life settlements. They have extensive knowledge of state laws and regulations governing these transactions and monitor market trends and buyer preferences. 

There is a lot of state regulation surrounding life settlements, and providers are responsible for ensuring that all requirements and disclosures comply. Compliance includes:

  • Obtaining the appropriate licenses.
  • Completing thorough background checks on all parties involved in the transaction.
  • Providing transparent communication with both the policyholder and investor.
  • Adhere to strict confidentiality standards to protect the privacy of all parties involved.

What Is A Viatical Settlement Provider

A life settlement provider will also be licensed to facilitate viatical settlements. However, there are some additional requirements that a viatical settlement provider must meet that do not apply to a life settlement providers. 

There are federal regulations regarding the compliance of viatical settlement providers. The IRS requires that a viatical settlement provider has a history of regularly purchasing life insurance policies from terminally ill and chronically ill insureds. They also must be licensed in the state where the insured lives. 

If the state doesn’t require licensing, the provider must adhere to the National Association of Insurance Commissioners (NAIC) guidelines regarding disclosing information in the Viatical Settlements Model Act. The viatical settlement provider must also follow the NAIC’s reasonable payment guidelines for terminally ill insureds, specifying minimum payouts based on the insured’s life expectancy. The lower the life expectancy, the higher the payout.

There are certain tax benefits that a viatical settlement qualifies for. However, if the provider does not meet the IRS requirements, the proceeds of the viatical settlement will be taxed even if the seller meets all other IRS requirements. 

List Of Life Settlement Providers

There are many life settlement providers throughout the United States. However, not all providers are licensed in all or even most states.  

Some key factors to consider when choosing a life settlement provider include their experience and track record, licensing and accreditation, customer reviews and references, as well as their fees and transparency in the process. A reputable provider should have a proven track record of successfully completing life settlements for clients, with positive reviews and references from satisfied customers.

Below are some of the prominent life settlement providers in the United States.

  • LifeTrust:  Licensed in 40 states, LifeTrust is well-known for its comprehensive client-centered approach. It has gathered positive reviews for its dedicated customer service and transparent operations. 
  • Abacus Settlements:  Abacus is licensed in 48 states and is a member of the Life Insurance Settlement Association (LISA).
  • Magna Life Settlements: – Magna is licensed in 41 states and accredited by the BBB. 
  • Institutional Life Services: – Licensed in 40 states and a member of LISA.
  • Montage Financial Group: – Montage is licensed in 38 states and is recognized for its proficiency in handling complex life settlement transactions. It has proven its industry prowess through a track record of timely settlements and satisfied customers. Montage is also a Life Insurance Settlement Association (LISA) member.
  • Coventry: – Licensed in 49 states and accredited by the Better Business Bureau (BBB), Coventry purchases many policies sold in the secondary life settlement market. 

There are instances where a policyholder can sell their policy to a buyer without working with a life settlement provider. However, unless you have a trusted financial advisor confirming the sale’s legality, it always makes sense to have a reputable life settlement provider facilitate the transaction. 

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