There are three major categories life settlement offers fall within.

1. Cash Offer - This offer includes a cash lump sum that is offered in exchange for a life settlement policy. Fees and the amount to the policy owner come out of the gross offer amount.
2. Retained Death Benefit (RDB) - This offer involves the policy owner retaining a portion of the life insurance policy face amount. The retained face amount can be irrevocably designated to a beneficiary chosen by the policy owner. This type of offer is typically higher than cash offers because the amount is not paid out until the policy matures. Premiums do not need to be paid by the policy owner for the retained amount of life insurance.
3. Hybrid Offer - A combination of Cash Offer and Retained Death Benefit may be used to maximize value to a policy owner. In some cases the best option could be a cash offer to help pay for expenses and maintaining a $50k retained death benefit amount to cover final expenses.

Retained Death Benefit Insight

With Retained Death Benefit (RDB), there are a few important considerations. First, not all buyers will make RDB offers. However, the primary restriction is if the state the policy owner lives in allows RDB and what the regulations are.

One common use to RDB is for cases where the insured could have significant health impairments but it is not clear how those impairments will impact life expectancy. A diminishing RDB schedule can then be used to have the first year (or years) be a high RDB and then the amount decreases over time. This decrease typically follows the premium payments and is used to preserve the returns of the fund while creating significantly higher value to the policy owner than a strictly cash offer could provide.

For example, Chris was a 68 year old male with a $1,000,000 Universal Life policy. He had a rare heart condition that had varying opinions as to the overall impact to life expectancy. To account for the varying life expectancy reports, an all cash offer came in at $300,000 while another offer was for $200,000 cash + $600,000 RDB that diminished over the course of 8 years. While the cash amount was less upfront, in year 3 when the policy matured the family received an additional $450,000.

Who Picks The Offer Structure Used?

It is ultimately up to each buyer to decide how they make offers. However, if a policy owner makes their preference clear, efforts can be made to obtain an offer that meets the preferred offer structure. While some buyers are limited in their offer structures, by working with an experienced life settlement broker the right buyers can be pursued to meet the policy owner's expectations.

Rapid Life Settlements is experienced at negotiating on behalf of policy owners to make sure the best offers are obtained. Through an expansive global network of buyers our success at meeting expectations is unprecedented.

Stephen Jass is the Co-Founder and CEO at Rapid Life Settlements. He has spent years in the life insurance and life settlement industries and is now determined to make the life settlement process as fast, easy and simple as possible.