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Life Settlement FAQ

What is a Life Settlement?

Life Settlement is a legitimate and reliable option to turn your unused life insurance policy into useable cash.

Life Settlement is the sale of a life insurance policy to a third party for cash. Typically performed by individuals age 65 and older, a life settlement will always exceeds the cash surrender value of your policy, but it will always be lower than the death benefit of your policy.

What is a Viatical Settlement?

Viatical Settlement is the sale of a life insurance policy by a terminally ill policyholder allowing the policyholder to benefit from the proceeds while alive. The sale of a life insurance policy will always exceed the cash surrender value of your policy, but it will always be lower than the death benefit of your policy.

What is a Death Benefit?

The Death Benefit of a life insurance policy is the cash payout a beneficiary(s) receives when the insured individual dies.

What is a Retained Death Benefit (RDB)? 

A Retained Death Benefit (RDB) is a life settlement option that allows a policy owner (seller) to retain a portion of their life insurance policy’s death benefit, for the beneficiary of their choice, in lieu of receiving a cash only lump sum settlement (a typical life settlement offer). This is a great option for individuals looking to eliminate expensive premium payments while keeping a portion of their life insurance coverage.

What is a Cash Surrender? 

The Cash Surrender Value of a life insurance policy is the cash payout a policyholder receives when they cancel their policy. This will always be less than the death benefit or life settlement benefit of a policy. The Cash Surrender Value is equal to the total cash value of your policy minus the cost of any cancellation fees.

Can I sell my Life Insurance Policy?

The 3 factors that affect eligibility are:

  • Age / Health: The majority of individuals who sell their life insurance policy are 65 years of age or older or have a serious medical condition (terminally ill)
  • Policy Type: Universal, Whole-Life and Convertible-Term Policies are all eligible for life settlement.
  • Policy Size: The value of your policy must be 100k or larger to quality for settlement options.

Who can sell their Life Insurance Policy?

People age 65 and or older are often eligible to sell their life insurance policy as long as the face value of the policy exceeds $100,000. The most commonly sold types of life insurance are Universal life insurance policies and other permanent policies (like whole life), but there are a variety of additional types of life insurance policies that can be sold.

The 3 main types of life insurance polices are Universal, Whole Life and Term Life.

Universal Life – Universal life insurance is permanent life insurance with an investment savings element and low premiums similar to term life insurance. Most universal life insurance policies contain a flexible premium option. However, some require a single premium (single lump-sum premium) or fixed premiums (scheduled fixed premiums).

Whole Life – Whole life insurance provides coverage for the life of the insured. In addition to providing a death benefit, whole life also contains a savings component where cash value may accumulate. These policies are also known as permanent or traditional life insurance.

Term Life – Term life insurance, also known as pure life insurance, is a type of life insurance that guarantees payment of a stated death benefit if the covered person dies during a specified term. Once the term expires, the policyholder can either renew it for another term, convert the policy to permanent coverage, or allow the policy to terminate.

High Premiums: Premiums are more expensive the older an individual becomes. If you are on a fixed income during retirement or have unforeseen medical expenses, it can make paying high premiums seem impossible. The first thought you may have it so stop paying premiums altogether and allow your policy to lapse. You will always receive more money from settlement than by surrendering a life insurance policy.

It’s No Longer Needed: When beneficiary(s) are no longer dependent on making a claim to continue their lifestyle when an insured individual dies, it can make more sense to sell your policy in order to have useable cash now rather than keep your policy active.

Extra Income: For retirement, for medical expenses, whatever the reason may be, many individuals find they need extra income in their golden years. Selling your life insurance policy can be a way to supplement income while also eliminating the need to pay high premiums.

Term Policy Expiration: Many term policies do not offer a cash value at expiration, and renewal costs can be high. An alternative to allowing your term policy to expire is to convert it into a universal life policy and sell it for cash. This allows the insured individual to receive a cash benefit at the end of their policy’s life when they feel life insurance is no longer needed.