Sell Life Contingent Payments Easily
Sell Life Contingent Payments Easily
Life Insurance or Self-Insurance are Two Options
When you sell life contingent payments — or, more specifically, when you sell life contingent annuity payments — getting a life insurance policy is always the preferred option.
Key Benefits of Using Life Insurance
- More Money: A life insurance policy lowers the buyer’s risk, which in turn lowers the discount rate and allows you to receive more money.
- Choose Beneficiary: Having a life insurance policy allows you to choose a beneficiary (children, relatives, spouse). They will be in “second position” behind the investor. Any excess death benefit will be paid to the beneficiary you chose after the investor has been paid off via Collateral Assignment of the life insurance policy.
Self-Insurance (Without Insurance)
Self-insured simply means moving forward without a traditional life insurance policy.
- Alternative Option: Fewer people will qualify for self-insurance, but it remains a viable option depending on the reason traditional life insurance was denied or wasn’t a viable option
- Less Money: You’ll get less money because the buyer assumes more risk, reflected in a higher discount rate.
Sell Life Contingent Payments with or without Life Insurance
Pros and Cons
Review the key differences below. Your best bet is to get life insurance if possible.
Jen is 40 years old and has monthly life contingent payments of $1,000 starting July 2024. She plans to sell 10 years (120 months) of payments.
Jen’s Transaction
with
Life Insurance
- Present value of payments at 13%: $39,000
- Insurance cost: -$10,000
- Net discount rate: 15%
Jen would receive
Jen’s Transaction
without
Life Insurance
- Present value of payments at 19%: $17,800
- Insurance cost: -$0
- Net discount rate: 19%
Jen would receive
This illustration is just an example, but it clearly shows the difference. In this scenario, Jen would receive $11,200 more by getting a life insurance policy instead of selling her life contingent annuity payments without insurance.
In addition to receiving more money, Jen is also able to choose a beneficiary. If she were to pass away, any remaining death benefit would be paid to the beneficiary she chose after the investor has been paid off through the collateral assignment of the life insurance policy.
Selling Life Contingent Payments FAQ
Some factoring companies encourage people to sell life contingent payments without life insurance. Their reasons can include any or all of the following:
- Some companies don’t have a properly trained team to structure the sale of life contingent payments. They’re content with simply charging a much higher discount rate and self-insuring the transaction.
- Some companies simply may not have relationships with life insurance companies that can offer the right coverage and “get the deal done”.
A life expectancy report is usually required.
The only reason you should sell life contingent payments without life insurance is if you don’t qualify for coverage.
Sell Life Contingent Payments — 5 Steps to Get Life Insurance
Step 1: Fill Out a Life Insurance Quote Request
The first step in getting a life insurance policy is to request a quote from a life insurance agent. We’ll fill out a simple preliminary questionnaire with you that asks a few basic health questions and send it to the life insurance agent we work with. The agent will typically respond within 1 to 2 business days.
Life Insurance Company May Offer Simplified Issue
In cases that don’t require a large amount of coverage and involve healthy, typically younger people, a policy may be offered without a medical exam referred to as Simplified Issue. There will still be a detailed phone interview, and the life insurance company will access your medical records to verify the information provided on the life insurance application.
Step 2: We’ll Determine If We Can Buy Your Life Contingent Payments
Once we receive the quote back from the agent, we’ll be able to determine if you can sell life contingent payments to us. If we’re able to move forward, we’ll have the life insurance agent complete a formal application directly with you. We’ll make it as easy as possible for you. Many of the questions will already have been answered on the preliminary questionnaire.
Step 3: Life Insurance Application and Paramed Exam
You’ll fill out the life insurance application, sign it, and return it back to the life insurance agent. Occasionally, companies may offer simplified issue policies as mentioned above without requiring a medical exam. This is typically reserved for young individuals that are deemed height/weight proportionate and healthy based on the questions they answered. Otherwise, once the insurance company receives the application, they will set up a Paramed Exam for you.
Step 4: Nurse Sends Test Samples to Laboratory
The nurse who conducted the medical exam will send the blood and urine samples, plus the blood pressure and height/weight measurements to a lab for testing.
Step 5: Test Results are Sent to Underwriter
The test results are sent to the Underwriter who works for the insurance company. The underwriter’s job is to assess the level of risk involved in insuring you and decide whether to approve or deny the application based on the information collected and the amount of coverage being requested.
This process takes 3 to 6 weeks, during which time we’d be working on the court process of buying your life contingent annuity payments.
Don’t Give Up if Denied
We don’t give up easily. Factor Financial has been able to obtain life insurance coverage for people with complex cases, including annuitants who live outside the United States. If it’s possible, we’ll find a way. If your circumstances make traditional coverage not viable, we may still be able to move forward by self-insuring the transaction.
Sell Life Contingent Payments for Cash
Sell life contingent payments with confidence. Let’s find out how much cash you can get and how life insurance coverage is used when selling life contingent payments.
