Life Settlement Questions, Answered

A life settlement is the sale of an existing life insurance policy to a third-party buyer — typically an institutional investor — for a lump-sum cash payment greater than the policy's surrender value. The buyer takes over premium payments and becomes the beneficiary. The original policyholder receives cash now, instead of waiting for a death benefit that may no longer serve their needs.

The typical life settlement process takes 60–120 days from application to closing. This includes policy evaluation, medical underwriting (which involves reviewing medical records), soliciting offers from institutional buyers, negotiating the best offer, and completing the ownership transfer. Complex cases or larger policies may take slightly longer. Paul keeps advisors and their clients informed throughout.

Most types of permanent life insurance can qualify, including universal life, whole life, guaranteed universal life (GUL), variable universal life, and indexed universal life. Term policies can also qualify — particularly those with conversion privileges. Key qualifying factors include the policy size (typically $100,000+ face value), the insured's age (generally 65+), and health status. Policies that are lapsing, no longer needed, or becoming unaffordable are strong candidates.

Yes. Life settlements are regulated at the state level. The majority of U.S. states have enacted life settlement laws that govern licensing of brokers and providers, disclosure requirements to the policyholder, contestability periods (typically 2–5 years from policy issuance before a policy can be settled), and anti-fraud provisions. Paul W. Bowen is nationally licensed as a life settlement broker and operates in full compliance with applicable state laws in every transaction.

Life settlement proceeds are typically taxed in three layers: (1) the amount received up to the cost basis (total premiums paid) is generally tax-free; (2) proceeds above the cost basis up to the cash surrender value are taxed as ordinary income; and (3) proceeds above the cash surrender value are typically taxed as long-term capital gains. Every situation is different, and clients should consult their tax advisor. Amrita Financial does not provide tax advice — but we can help connect advisors with resources to guide the conversation.

Offers are based on a combination of factors: the policy's face value, the insured's life expectancy (based on medical records reviewed by independent underwriters), the policy's current and projected future premium costs, the current interest rate environment, and competition among institutional buyers. Paul submits each case to multiple buyers to ensure competitive offers — and he negotiates on behalf of the policyholder, not the buyer.

Your role is simple: identify clients who may benefit and make the introduction. You don't need to be licensed as a life settlement broker. You don't need to manage the process. You don't need to become an expert in life settlements. Amrita Financial handles evaluation, underwriting, buyer outreach, negotiation, and closing. You stay informed throughout, your client stays connected to you as their trusted advisor, and you receive a referral fee when the transaction closes.

No — that's a common misconception. Terminal illness is a requirement for a viatical settlement, which is a different product. A life settlement has no terminal illness requirement. The insured must generally be 65 or older (some cases qualify at younger ages with significant health changes), and the policy must meet size and type thresholds. Many healthy retirees with policies they no longer need qualify.

After closing, the institutional buyer takes over ownership and premium payments. They become the new beneficiary and will receive the death benefit when the insured passes. The original policyholder has no further obligation to the policy and no ongoing relationship with the buyer. The proceeds are theirs to use however they choose — retirement income, long-term care funding, paying off debt, gifting, or anything else.

Amrita Financial earns a broker commission, which is paid by the institutional buyer as part of the transaction — not by the policyholder or the referring advisor. This means there is no out-of-pocket cost to your client to explore whether their policy qualifies. The referring advisor's fee is also paid from the transaction proceeds in accordance with applicable regulations.

Yes. Until a closing document is signed, the policyholder can withdraw from the process at any time. Additionally, most state laws require a "right of rescission" period — typically 15–30 days after closing — during which the policyholder can cancel the transaction and return the proceeds. Paul explains all rights and timelines clearly before the process begins.

The majority of U.S. states have enacted life settlement laws and allow properly licensed brokers to facilitate transactions. A small number of states have more limited frameworks or are still developing regulation. Paul is nationally licensed and can advise on whether a specific state's regulatory environment supports a given transaction. The best approach is always to contact us with your client's situation — we'll tell you quickly whether it's a viable option.

A life settlement broker (like Amrita Financial) represents the policyholder — the seller. Our job is to market the policy to multiple institutional buyers and negotiate the highest possible offer on behalf of your client. A life settlement provider represents the buyer — the institutional investor purchasing the policy. Working with a broker ensures your client's interests are represented, not the buyer's.