What Are Life Insurance Settlements?

Did you know you can sell all or a portion of a life insurance policy, even term insurance?

(4 minute read)

You may have reached a point in your life where paying your life insurance policy premiums feels more like a burden than a safety net. This may be especially true for those wrapping up a successful career and downsizing by doing such things like selling vacation homes or paying off debt. If that is the case, you might consider selling your life insurance policy, also known as a life insurance settlement. Educating yourself on this topic may feel like a daunting task, but contacting life settlement companies for more information or using a life settlement calculator can make the process much easier. If you are new to the concept of life settlement, read on to find out answers to commonly asked questions on the topic. 

Who Qualifies for a Life Settlement?

You must meet certain requirements to qualify for a life settlement, namely age, health, and policy value requirements. $50,000 is usually the bottom-line threshold for life settlement companies to consider making an offer on your policy. A higher policy value yields a higher payout, as one would expect. 

A trickier concept is how age and health play into your policy’s market value. As unsettling as it may be to consider, an older policyholder (65 years or older) with serious health conditions will result in a more profitable life settlement. It is less beneficial for a buyer to take on a life insurance policy if the policyholder is in great health with many years of life ahead of them still. The buyer would most likely end up paying too much in premiums and receive no return when all is said and done. 

People who find themselves meeting the age and health requirements can start to see the benefits from selling their life insurance policy. For someone who is facing a terminal illness, the cash from a policy buyout could be the perfect financial solution for mountains of unexpected medical debt. Another policyholder with grown children financially supporting themselves may find they no longer need the safeguard of a life insurance policy. While the age and health requirements still must be met, there are many reasons a life settlement may benefit a policyholder. 

How Much Is a Life Settlement?

The amount of a life settlement can vary, but policyholders who choose this route will typically receive around 20% to 25% of the policy value. Depending on the factors described above, you can receive more or less than this range, but the payout value will always be less than the death benefit of the policy and more than the cash surrender value. The length of time the buyer anticipates having to pay the premiums is one of the bigger considerations in determining the market value of a policy. By using our life settlement calculator, you can get a better idea of your potential selling power. 

Are Life Settlements Safe?

The majority of states  have regulated life settlements over the past couple decades, which has made the process significantly safer for the sellers and buyers. Most of these regulations involve life settlement companies disclosing certain information that educates the policyholder and assists them with making the best decision for themselves and their families. One of the more important disclosures explains to policyholders how a life settlement could affect their government assistance eligibility. Other disclosures also include information about effects on tax liability. Due to these regulations, life settlements are one of the safer options available in the market. 

What Is a Life Settlement Broker?

Life settlement brokers represent the policyholder/seller in the sale of their policy, similar to how a real estate agent would assist the seller of a house. Every state has its own requirements for becoming a life settlement broker, but many require that the broker obtain license. The application process for obtaining a broker license digs into the broker’s criminal, professional licensing, and financial history. Once licensed, brokers are legally and ethically obligated to act in the best interests of the policyholder, advising them through the life settlement process. Additionally, a life settlement broker receives a financial return on their work with the seller via commission or a fee, which drives them to guide the seller to the best possible outcome for their circumstances. 

How Do I Start the Life Settlement Process?

If you feel that selling your life insurance policy is a prudent financial decision for you and your family, especially after running through the life settlement calculator, please contact us at Life Settlement Advisors. We look forward to helping you achieve your financial goals through life settlement.

Did you know you can sell all or a portion of a life insurance policy, even term insurance? Selling an unwanted life insurance policy is no different than selling your car, home, or any other valuable asset that will create immediate cash. Contact us today to learn more.

Get in touch with Life Settlement Advisors today to take the first step toward converting your policy into cash.

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.