Last Updated: September 2020
Structured settlements buyouts are often known to be tricky due to insurable interest being present to the life insurance companies at the time of completion.
This can cause issues for individuals who need to complete a structured settlement buyout but do not know exactly what the best approach and methods may be.
The rest of this brief article will detail not only why structured settlement buyouts can be tricky but how you can go about completing the process correctly and what a structured settlement buyout is and how they are typically executed.
Here’s a brief overview of what we will cover today:
- Structured Settlement Buyouts and Life Insurance and Why is it So Hard To Find Life Insurance for Annuity Buyouts?
- Bottom Line, Structured Settlement Buyouts Can Be Tricky But We Can Help
Life Insurance is Boring. Let’s Get To The Root Of It! Here are the key takeaways…
Structured settlement buyouts are designed to provide a stream of payments that are often provided or awarded due to an accident, workers’ compensation claim, or legal judgments. To complete this process, an annuity is often purchased from an insurance company and payments are then guaranteed for life over the course of the annuity contract.
Structured Settlement Buyouts and Life Insurance and Why is it So Hard To Find Life Insurance for Annuity Buyouts?
Structured settlements are designed to create a stream of payments that are often awarded due to things such as the following:
- Worker Compensation Claims
- Legal Judgements
The payments are created and streamed in most situations using an annuity contract from an insurance company.
This annuity, in turn, will provide payments to the individual for life as stated in the contract.
The problem most structured settlement buyout companies have is actually finding a life insurance carrier that will write the business.
99% of carriers will deny a new life insurance application if they know it’s to guarantee the payments of a structured settlement buyout.
This is because of insurable interest.
Wikipedia explains insurable interest best:
Insurable interest exists when an insured person derives a financial or other kind of benefit from the continuous existence of the insured object (or in the context of living persons, their continued survival). A person has an insurable interest in something when loss-of or damage-to that thing would cause the person to suffer a financial loss or other kind of loss.
With structured settlement buyouts, you’re collaterally assigning the life insurance policy to an investor… and often times changing ownership of the policy to the investor too.
Most life insurance companies will say there’s not enough insurable interest and won’t take these cases.
It can be argued that there is insurable interest, but that’s a whole other article and we’d be getting off-topic.
What Life Insurance Companies Take Structured Settlement Buyouts?
We’re an independent agency and our job is to survey the entire market on a regular basis for the agencies that refer us to their clients who need life insurance in order to get their lump sum payout.
Policies, procedures, and underwriting guidelines for life insurance companies change all of the time.
Even the life insurance companies that take these annuity buyouts (structured settlements) changes all the time.
However, we have always found that a few life insurance companies on the market will take them (out of 100s of life insurance companies).
We’ve found that most life insurance agencies will tell you they don’t have many companies that will take these types of cases.
If you have been told by a life insurance agent that a structured settlement buyout is not possible…
They just haven’t done the leg work to call the life insurance companies and ask OR they just don’t have the network of carriers we do.
This is why working with an independent agency is always imperative and creates you the most options to work with.
Bottom Line, Structured Settlement Buyouts Can Be Tricky But We Can Help
Be Careful: Some of the more shady life insurance agents may tell you do not disclose that this life insurance policy is for a structured settlement.
I can tell you that even if you get a policy in force when you do the collateral assignment or change the owner to the investor, there’s a very high possibility your policy will be terminated.
You need to disclose that the life insurance policy is applied for is for an annuity buyout and we do that with every case that gets sent our way.
We work with structured settlement buyout companies to help their clients obtain life insurance coverage to secure their lump-sum payouts.
If you’re having trouble finding life insurance for your clients OR you’re trying to secure a lump sum payout on your annuity payments, please contact us.
We’re most likely able to help as long as you’re an insurable risk.
This means as long as you’re fairly healthy or don’t have any major lifestyle issues (criminal, high-risk occupation, etc).
Even if you are looking for high-risk life insurance, we can help.
We work with clients looking to purchase life insurance coverage in order to secure their annuity buyout daily.
Rest assured that we know what we’re doing.
You don’t have to spend time telling us the process or wait for someone to “find out” if they can help you.
You tell us what you need to be done and we’ll show you your options.
Do you still work with factoring companies?
Hi James – We do. Give me a call to discuss.