Life Settlement
Candlefocus EditorLife settlements can be beneficial to policyowners by allowing them to convert their policy into a lump-sum cash payment, which can be used for retirement or other important needs. This cash payment often exceeds the policy's current surrender value or net cash value.
Life settlements provide policy owners with an alternative to surrendering a policy to an insurance company. Surrendering a policy will often provide only a fraction of the value available through a life settlement. The precise amount of money that a policy owner may receive depends upon the current policy’s cash surrender value, life expectancy or age of the insured, type of insurance policy, and its features.
When a policyholder enters into a life settlement agreement, he or she historically receives more money than what the insurer would pay if the policy were to be surrendered. Most life settlements range between 20 and 80 percent of the policy's face value, depending on the policyholder's age, current health, policy type and other factors.
Life settlement transactions are regulated on the state level and require the policyholder to obtain professional advice regarding their policy, and an appraisal (actuarial report) of the policy’s current life expectancy and value. A trained life settlement broker can also assist in locating a willing and qualified buyer, and can also provide guidance to policyholders when making such a decision.
Life settlements can provide a much needed financial resource that can be used for retirement, long-term care or other important needs. Many life insurance beneficiaries may not even be aware that a life settlement is an option. Life settlements offer policy owners a valuable financial tool for realizing the equity of their policies.