What is a Life Settlement?

A life settlement involves selling an unwanted or unneeded life insurance policy to a third party investor. Often, these investors – who are typically life settlement brokers or life settlement providers – will purchase a policy for far more than what can be received by simply surrendering or cashing out the policy.

This is because a life settlement provider will pay the policy owner a percentage of the policy’s death benefit which in most cases can be substantially more than the amount of the cash value that is in the plan’s cash value component.

Life Settlements

Don't Cancel That Life Insurance Policy - Sell It!

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How Life Settlements Work

A life settlement entails the purchase of a life insurance policy in return for a lump sum of cash. This is not the same as cancelling or surrendering the policy through the issuing insurer – and in many cases, the amount of cash that is received by the policy holder can be up to four times higher than what is in the cash value component.

With these transactions, the life settlement company will actually become the owner and the beneficiary of the policy, once it has been purchased. This means that the life insurance settlement company will also make the policy’s premiums in order to keep the plan in force. Then, when the time comes, it is the life settlement company that will eventually receive the policy’s death benefit proceeds.

Advantages of Life Settlements

There are many advantages to selling your life insurance policy via a life settlement transaction – especially if you no longer want or need the coverage. Some of the benefits of doing so can include:

  • The ability to receive much more than just the policy’s cash or surrender value
  • No need to continue making premium payments on the policy
  • Can provide a way to pay off debt or to make long-awaited purchases
  • Allows a way to make up for stock market losses
  • Provides an alternate way to pay for a long-term care need

Things to Consider

Although there are many benefits associated with life settlements, there are also some factors to consider prior to moving forward. For example, you should make sure of the tax implications. This is because not all of the proceeds received will be tax free. In most cases, any gain that you receive on the transaction could be subject to taxation.

You should also ensure that your creditors cannot gain access to the fund that you receive. This is especially the case if you are subject to any type of lawsuit or bankruptcy transaction.

In addition, prior to moving forward, it is essential that you ensure that you no longer have need for the life insurance coverage. If, for instance, your beneficiaries will need funds for paying your final expenses or other unpaid debts, you may wish to reconsider.


Should this be the right decision for you, however, the funds that are received from a life settlement transaction can make a big difference in the way that many seniors plan for retirement or other financial needs. In fact, many individuals and couples are not aware that these options even exist for them.

If you have a life insurance policy that you no longer need, or if the premiums have become unaffordable, contact us. We can show you the options that are available to

Do you Have a Life Insurance Policy That You no Longer Need?

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