Senior life settlements let you sell a life insurance policy you no longer need for a lump sum that exceeds what your insurer would pay if you were to surrender it. If you’re in your mid-70s or older and have a policy that no longer fits your life, this guide covers what your life insurance policy is worth and what to expect before you decide anything.
What Is a Life Settlement and Why Do Seniors Choose One?
A life settlement is a transaction where a third-party buyer purchases your policy for a lump sum that’s higher than the cash surrender value your insurer would have paid for it. The buyer will purchase your policy for a lump sum and collect the death benefit upon the maturity of the policy. They also take over your premium obligations, and you get to walk away with cash you can use for anything you need.
A life settlement can be a great choice for you if:
- You can no longer justify the premiums on a fixed income
- Your children are grown, your mortgage is paid off, and the death benefit no longer serves the purpose you bought it for
- You’re dealing with medical bills or other expenses your retirement savings can’t fully cover
- You would like to have additional funds to start checking off items on your bucket list
Whatever brought you here, how much you can sell your life insurance policy for depends on your specific policy type and health profile.
Who Qualifies for a Senior Life Settlement?
Senior life settlements are not available to everyone, but the qualifying profile is broader than many people expect. You don’t need to be in poor health to qualify, although you do need to meet a few baseline criteria that institutional buyers use to evaluate if your policy is worth purchasing. Always review your life settlement eligibility in detail before assuming your only option is to surrender to the insurance company.
This is the general profile buyers look for:
- Age: Usually mid-70s or older, though those in their 60s may qualify if they have serious chronic conditions
- Health: If your health has changed considerably since you took the policy out
- Life expectancy: Generally 15 years or less, as assessed by an independent actuarial company
- Policy face value: A minimum death benefit of $100,000, though larger policies attract more competitive offers.
If you’ve received a terminal illness diagnosis, then a viatical settlement may be the better path for you. They’re designed specifically for policyholders facing a serious illness and tend to return a higher percentage of the death benefit than a standard life settlement would.
The Life Settlement Process, From Submission to Payout
The life settlement process usually takes approximately 90 days from start to finish, but it can vary. How long a life settlement takes depends on how quickly your medical records are received and how efficiently the insurer processes the ownership and beneficiary changes. That’s why working with an experienced broker like Life Settlement Advisors can speed up the timeline by preventing the most common problems.
This is what you can expect at each stage:
- 1. Submit your policy and sign a medical records release form: Your broker collects your policy documents and asks you to sign a form authorizing them to gather your medical records on your behalf.
- 2. Complete life expectancy underwriting: Independent actuaries review your medical history and calculate a life expectancy assessment that buyers use to price their offers.
- 3. Shop your policy to multiple institutional buyers: Your broker sends your policy to multiple buyers at the same time. This allows them to compete to offer the highest amount.
- 4. Review and negotiate offers: Your broker presents every offer, negotiates on your behalf, and walks you through your options before you have to commit to anything.
- 5. Close and receive your payout: Once you accept an offer, a closing packet is sent to you for completion. Once the insurer processes the ownership and beneficiary transfers, the escrow agent releases your funds within a few business days.
The process can be long and confusing, especially for seniors dealing with medical or financial challenges. Life Settlement Advisors updates you on a weekly basis so you always know where things stand.
Why Working With a Broker Protects Your Interests
Not every company in the life settlement market will work in your best interest. For example, selling to a direct buyer only gets you a single offer, and it’s in their best interest to get you to agree to the lowest possible number. A life settlement broker has a fiduciary duty to you, which means they shop your policy to multiple buyers and negotiate on your behalf to get you the highest possible offer. That’s what makes the broker model the strongest choice for sellers.
But before you choose a broker, always verify their license. Brokers and providers must hold an active license in the state where you reside. You can confirm that license through your state’s insurance department before you engage anyone.
Is a Life Settlement Right for You?
A life settlement is just one option among many. The right answer for you depends on your policy, health status, goals, and whether you still need the coverage for your family. Always think about the pros and cons of selling a life insurance policy before you decide, preferably with someone who can walk you through the full range of alternatives like surrendering your policy or selling a portion of the policy.
Two more things worth knowing before you commit are taxes and healthcare. Proceeds from a life settlement may be taxable depending on your cost basis, and a large payout may affect eligibility for Medicaid or other means-tested benefits. A CPA or a financial advisor can help you evaluate both before you have to sign anything.
Life Settlement Advisors has worked as a seller’s broker for more than 26 years, with no upfront fees and a commitment to keeping you informed every step of the way. Send us your case and see if you qualify for a life settlement before making any permanent decision.
