Wisconsin Administrative Code › Office of the Commissioner of Insurance › Chapter Ins 2 - Life Insurance › Appendix II

Current through June 24, 2024
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.