Life insurance policies are legally viewed as financial assets which may be sold to a third party at the owner’s discretion. A life settlement is the sale of an existing life insurance policy for more than its cash surrender value but less than its net death benefit. Life settlements are an option for policyholders who determine that their current policy is about to lapse, is under-performing, or is no longer needed due to changes in the owner’s personal or financial circumstances.

Through a life settlement transaction, a policyholder can convert an unwanted life insurance policy into a lump sum cash payment. The new owner buys the policy at a discount to its face value and makes all future premium payments. The new owner receives the death benefit payable under the policy from the issuing insurance company. From the original owner’s standpoint, a life settlement typically is a better alternative to letting the life insurance policy lapse or surrendering it for a lower amount back to the issuing insurance company.

While life insurance is an important security feature for certain periods of a person’s life, there may come a time when it is no longer needed. In circumstances like the following, life settlements might make sense for a policyowner:

• Considering lapsing a policy?
• Want to cash out your policy to help enjoy life with your family now?
• No longer need your policy to support your family if you pass away?
• No viable beneficiaries for your policy?
• Premiums too expensive and your policy is no longer affordable?
• Have immediate cash needs for a life event?
• Estate liquidity needs are less?
• Need money to fund health care or assisted living costs?
• Want to take advantage of a convertible term option?

“The ability to sell their policies as a life settlement enabled policy owners to receive an amount more than four times greater than what they would have received had they surrendered their policies to their insurance companies.” – London Business School Study, June 2013.

Eligibility is affected by many factors, but these attributes will increase the chance of selling your life insurance policy through a life settlement or a viatical settlement:

Life Settlement:

• Age: 65 and older (younger insureds with more significant health issues may also qualify).
• Health: Have had a change in health since the policy was issued.
• Policy Type: All types of permanent life insurance, including: Universal Life, Whole Life and Convertible Term.
• Face Amount: $100,000 and up.

Viatical Settlement:

• Age: Any age.
• Health: Must have a life threatening or chronic disease that will result in a contracted life expectancy.
• Policy Type: All types of life insurance, including: Universal Life, Whole Life, Term Life and Convertible Term.
• Face Amount: $100,000 and up.