What is a life settlement?
A life settlement is a financial transaction where a person sells a life insurance policy for more than the policy’s cash surrender value and less than it’s face value. The seller of the policy receives a cash payment. The buyer of the policy assumes responsibility for all future premium payments.
Why would someone sell their life insurance policy?
A policy owner might decide to sell their policy because they no longer can afford premiums, they need cash in the short term to help with medical bills and other income needs, or sometimes just because they no longer need the insurance. Often situations change over time and a life settlement is a powerful alternative to lapsing or surrendering a policy.
What types of policies can be sold?
Almost all types of life insurance policies can be sold. These include term and permanent insurance (Universal and Whole life), survivorship policies, group policies, variable life and adjustable life policies, among others.
How much can I expect to receive for my policy?
The value of any given policy is driven by several factors and will vary based on the insured’s age, current health, the policy they own and how past premiums were paid.
According to a 2013 study by the London Business School, Americans who sold their unwanted life insurance policies, received on average more than four times the amount they would have received had they surrendered the same policy to their life insurance companies.
Can I sell a portion of my life insurance policy?
Yes. Often times a policy owner still needs to maintain coverage, but the premiums become too expensive. A Life Settlement can allow a policy owner to maintain a portion of their death benefit while eliminating the need to pay premiums.