How to Know if You Qualify for a Life Settlement

4 minute Read

A life settlement can be an excellent option for obtaining an immediate payout of cash to alleviate financial burdens such as debt or costly medical treatments. With more than 500,000 seniors allowing their life insurance policy to lapse annually, you might want to consider if a life settlement is right for you.

Qualifying for a life settlement takes many factors into account. While each situation is different, below are some minimum requirements that could mean the difference of thousands of dollars for you and your family. Here’s how to know if you qualify for a life settlement.

Age and Health that Qualifies for a Life Settlement

One out of every four 65-year-olds will live past age 90. A policyholder’s current age and health condition are critical factors in determining if they are a good candidate for a life settlement. Seniors aged 65 and older can qualify for a life settlement, and the older the person is, the more valuable the life settlement. A change in health since the policy was issued may increase the chances of qualifying for a life settlement.

Life Expectancy that Qualifies for a Life Settlement

Life expectancy, calculated using medical records and age, is another key factor in determining whether you qualify for a life settlement. The life expectancy for Americans has been increasing for the past 100 years, but the policies that are most attractive to third-party buyers are those with a shorter life expectancy. This is because the longer a person is projected to live, the longer the buyer has to pay the premium and wait to collect the death benefit. The most suitable candidate for a life settlement is one with a life expectancy of less than 13 years.

Premium Amount that Qualifies for a Life Settlement

Premiums for term or universal life policies often increase over time. Since a third-party buyer will be taking over the monthly premiums, the lower the cost of those premiums, the more value to a life settlement. Yearly premiums are one of the biggest drivers in determining the value of the policy.

Type and Size of Policies that Qualify for a Life Settlement

Life insurance policies that qualify for a life settlement must be at least two years old, and the death benefit on the policy should be at least $100,000. While  universal life, is the most common policy purchased, convertible term, whole life, and second to die policies can qualify for a life settlement as well. Premium financed and standard term policies do not qualify, due to additional investment risk.

Baby Boomers are retiring at a rate of about 10,000 per day, which is nearly 4 million per year. Many of these seniors’ life insurance policies are no longer necessary, or the money they could receive in a life settlement could be put to better use. After you understand how to know if you qualify for a life settlement, use our life settlement calculator to give you a better understanding of where you’ll stand once you’re ready to apply.

Case Study: Henry lost his wife to cancer last year. The $300k term life insurance policy was no longer needed. Henry’s policy is convertible, so he sold his policy for $55k and used the proceeds to check off a few items on his bucket list.

Leo LaGrotte
Life Settlement Advisors

Get in touch with Life Settlement Advisors today to take the first step toward converting your policy into cash.
Life Settlement Advisors
Leo LaGrotte
At Life Settlement Advisors, we strive to be a voice of confidence and assurance for our clients. Our goal is to educate you about the life settlement process so you can make an educated decision about whether it is right for you.

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