If you’re reading this, you’re probably considering selling your life insurance policy. Life settlement companies like Life Settlement Advisors (LSA) love helping our clients sell their life insurance policies for more money, less hassle, and the freedom to spend their golden years doing what they love. An unwanted life insurance policy can be sold for a life settlement, which is a cash value much higher than the surrender value. This can be a great choice for many policyholders, and you may be one of them. The first step, though, is finding the right broker for your policy: someone who can help you understand how selling a policy works and someone you can trust will find the best deal for your policy—and keep you informed every step of the way.
At Life Settlement Advisors, we provide these very services. Our advisors are skilled, empathetic, and will do their best to make sure you get the best payout possible. But what does that look like, exactly? In this article, we’ll cover some of the basics about life settlement brokers and life settlements, answering questions like:
- What do life settlement brokers do?
- How much do life settlements pay?
- Are life settlements worth it?
We’ll also provide you with a few resources and ways to get in touch with us if you have more questions. With that said, let’s get started!
What Is a Life Settlement Broker?
A life settlement broker, also known as an advisor, is a professional who acts on behalf of a life insurance policyholder. A broker walks policyholders through the process of selling their life insurance policy for a life insurance settlement, which includes searching for—and ultimately securing—a finalized offer. Typically, they will also get a commission from the sale of a policy. A life settlement broker can also purchase your policy themselves, but will usually seek a buyer for your policy, which are known as life settlement providers.
A policyholder may decide to sell their life insurance policy for a number of reasons, such as no longer needing the policy, wanting to eliminate monthly premiums, or wanting more money for an unexpected expense. In all of these cases, a life settlement is a much better option than lapsing on the policy; it’s also a better option than surrendering the policy. While many life insurance policies do have a cash value upon surrender, this amount is typically far lower than what a policyholder would receive from selling the policy. And having a broker assist with this process ensures the policyholder gets the best payout possible.
How exactly does a life settlement broker help a policyholder get a life settlement? Essentially, a broker starts by helping a policyholder compile all the information they need to ensure a higher payout—things such as the complete medical file of the insured, life expectancy report, policy information , and so on. The broker will then shop the policy around to various life settlement providers (buyers), and bring all potential offers back to the policyholder for review. Once an offer is decided on, the broker also walks the policyholder through the sale, making sure everything goes smoothly.
Having a broker makes selling a life insurance policy much easier and ensures a higher payout for the policyholder. Life settlement brokers also help a policyholder understand whether their policy can be sold—and if not, what could be done to potentially make the policy eligible for sale. Unfortunately, not every policy can be sold and there are some requirements the policyholder has to meet, such as being 65 years old at minimum. We’ll talk more about life settlement requirements in later sections. Or, you can visit this qualifications calculator for a more comprehensive look at what is required to sell a life insurance policy.
Which Policies Cannot Be Sold as Part of a Life Settlement?
Generally, term life insurance policies cannot be sold for a life settlement. The one exception is if a term policy is convertible into one of the eligible types—that is, whole, universal, or variable life policies. If you’re a policyholder that’s unsure whether your policy can be sold or converted, please reach out to us at LSA and we’d be happy to help you.
How Are Life Settlements Calculated?
Multiple factors influence the payout of a life settlement, and in different ways. Here are five of them:
- Policy Size | In general, the payout from a life settlement will be proportional to the policy’s death benefit. A policy needs to be at least $100,000 to be eligible for sale, but the larger your death benefit is, the larger your settlement will be. This is because the life insurance provider who buys your policy will receive a higher payout upon the passing of the policyholder.
- Age | You must be at least 65 years old to sell your life insurance policy. Beyond that, every additional year is an asset to your final payout; the older you are, the better of a payout you will likely receive.
- Health | The ideal candidate for a life settlement is someone who has experienced a change of health since their policy was issued. If a policyholder has experienced a sharp decline in physical health, the policy is worth more to a provider.
- Gender | Once again, this is a case where a shorter life expectancy yields a higher payout. Since men tend to have shorter life expectancies than women, a male policyholder will typically get a higher payout on average.
- Outstanding Policy Loans | Some life insurance policies allow you to borrow a cash amount against their value. While this is a good benefit, if you have unpaid loans against your policy when you sell it, potential buyers will factor that in when considering a purchase of your policy.
Good life settlement brokers—like those at LSA—will be familiar with not just these factors, but several others that might impact your payout. Our brokers know how to get the best outcome for your policy, and will help you secure the highest payout possible from your life settlement.
What Is the Average Payout for a Life Settlement?
Typically, the payout for a life settlement is 4–7 times higher than the cash surrender value, which is usually around 20% of the policy’s value. Compare this figure to the average cash surrender value, which is only $460 to every $100,000; that’s not even half of 1%! Of course, the exact amount will depend on your qualifications, policy, and other details. If you’re curious about how much your policy could be worth, you can use our life settlement calculator to see if you qualify for a life settlement.
Is a Life Settlement a Good Idea?
If you’re unsure of whether you should sell your life insurance policy, ask yourself these questions:
- Are you unable to pay your premiums, or simply tired of paying them? Some policyholders may find their premiums put too much strain on their finances, and others may simply prefer to keep that cash in their pocket. But rather than lapsing on your policy or taking an underwhelming cash surrender value, consider selling your life insurance policy. You get rid of the pesky premiums, and receive a much higher payout than what you’d get from your surrender value.
- Do you need money as soon as possible? If you’ve recently had a major expense or unforeseen circumstance arise, such as medical bills or a financial emergency, a life insurance policy won’t be of much help—especially since you’ll be paying its premiums. Selling your life insurance policy will give you more financial breathing room, not just with cash you can spend but by cutting out another unneeded expense.
- Do you no longer need a life insurance policy? Maybe the reasons you initially bought the policy are no longer relevant. For example, your dependents no longer need the financial safety net. Whatever the cause for this change may be, you shouldn’t have to keep paying for something you don’t want or need anymore. Selling your policy gets rid of a payment you don’t need to make, and on top of that, you’ll get some additional cash to use in ways that matter to you now.
- Would you like to have more cash—and more freedom to spend it? Choosing to sell your policy doesn’t always have to be a strictly strategic choice. Maybe you simply just want to live the best possible life for yourself: more money to spend in the ways you want, with the people you want. In this case, selling your policy may also be a good idea. You’ll have more money in your pocket, and less to worry about for your finances. Planning for the future with life insurance is smart, but so is living in the moment.
- Will you have the help of a trusted advisor or life settlement broker? Even if you know you want to sell your policy, it’s not a good idea to go through that process alone, and you don’t have to. There are brokers with years of experience in life settlements and working with life settlement providers, and these brokers can help you get the best payout possible. That’s exactly what we do at LSA, and we’re always happy to help policyholders get the freedom and money they need.
Additionally, if the thought of having no life insurance at all is troubling to you, it’s worth noting that you can opt to simply sell a portion of your policy instead. In this case, the buyer will receive a percentage of the death benefit, but in exchange will pay your monthly premiums. You will get to keep a portion of your policy while still enjoying the financial freedom of no premiums. If you’re interested in this route, a broker can help you navigate that process.
What Are the Benefits of Life Settlements?
Here are just a few of the things to look forward to if you decide to sell your policy for a life settlement:
- Eliminating the expense of monthly premiums
- Receiving a much higher cash payout than your policy’s surrender value
- Getting out of an unwanted or unneeded policy without lapsing
- Gaining more money to spend in the here and now, in the ways you want to spend it
If you’re over 65 years of age, have had a recent change in your health, and want more spending power, selling your life insurance policy may be a great way to improve your quality of life all around. And with the help of an experienced life settlement broker, you’ll be able to get the most value out of selling your policy.
LSA: The Best Place To Sell Your Life Insurance Policy
Are you ready to have more money, fewer expenses, and the freedom to live out your best years? If you answered “yes” to all of these questions, then you should consider selling your life insurance policy. Whether you no longer want or need your policy, or simply don’t want to pay for it anymore, a life settlement is likely the best option for you. But to get the biggest payout possible, you’ll want the help of a trusted life settlement broker who has your best interests in mind.
That’s who we are at LSA. And if you’re interested in selling your policy, we’d be more than happy to work with you. Here are a few next steps you can take towards procuring your life settlement:
- Visit our FAQ page if you have additional questions about life settlements.
- Read more about the process of selling your policy and what to expect.
- Use our qualification calculator to make sure a life settlement is right for you.
- If you’re ready to start the process, submit your case to us and we’ll review it ASAP.
If you need any other assistance or have any questions, please contact us. We look forward to hearing from you, and hopefully working with you!