What is a life settlement?

A life settlement is the sale of an existing life insurance policy to a third party for its market value.

When a life insurance policy is no longer needed or becomes unaffordable, the vast majority of policyowners lapse or surrender it back to the insurance company for little or no value. Life settlements pay policyowners for the sale of their policy an amount that is on average four to 11 times more than if they terminated their policy, according to government and university studies.

Policyowners have a property right in their life insurance policy, including the right to sell that policy. The United States Supreme Court, in 1911, held that “life insurance has become in our days one of the best recognized forms of investment and self-compelled saving. So far as reasonable safety permits, it is desirable to give to life policies the ordinary characteristics of property,” and that restricting a policyowner’s property rights to sell their policy was illegal and would “diminish appreciably the value of the contract in the owner’s hands.” Grigsby v. Russell, 222 US 149 (1911)

Today 43 states regulate life settlements, covering over 90 percent of US population.  These laws establish extensive consumer protections for policyowners, including licensing of life settlement brokers and providers, form approval, consumer disclosures, anti-fraud prevention and reporting and privacy protections.

 

Key features of the Lighthouse Life Settlement Advisor Program

Educating and referring policyowners to Lighthouse Life

  • Lighthouse Life provides educational materials about life settlements to financial professionals as well as fast and easy life insurance policy appraisals for qualified policyowners. We set the standard for compliance and consumer protections.

What we do for policyowners:

  • Require policyowners to identify the reasons they are considering the sale of their life insurance at the start of the process, in order that financial professionals may best understand and suitably advise the policyowner.
  • Receive an acknowledgement from the policyowner that they understand that they can receive multiple offers for the purchase of their policy and are encouraged to do so.
  • Disclose to the policyowner that the financial professional referring the policyowner to Lighthouse Life is a representative of the company and may receive a fee for the referral.
  • Disclose to the policyowner all referral fees paid to the financial professional referring the policyowner to Lighthouse Life.

What we do for financial professionals:

  • Provide financial protection, through coverage under Lighthouse Life $10 million/$5 million professional liability insurance.
  • Provide compliance resources and support regarding suitability, best execution, privacy and other requirements.
  • Have a secure portal to obtain real-time status reports of policyowner referrals.
  • Provide education, training, support and resources for financial professionals about life settlements and the life settlement transaction.