How selling your insurance policy works
Life settlements are a more valuable alternative than cash surrenders, letting a policy lapse, or taking out a loan against a policy. A life settlement allows you to get the real market value for the sale of your life insurance policy. Lapsing a policy back to the insurance company means you’ll receive no payout.
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If you surrender the policy, you'll usually receive only a quarter to a sixth of what you could get from a life settlement.​
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Get more, not less, from a life settlement. You owe it to yourself to find out if a life settlement can help you.
Why Do People Sell Their Life Insurance for a Life Settlement?
With health care, long-term care, and living costs on the rise, retirees often find themselves in a situation where they need more money. Here are some of the most common reasons you may consider selling your life insurance policy:
YOU NO LONGER WANT TO MAKE PREMIUM PAYMENTS
Depending on the terms of your policy, changes in the insurance market or poor policy performance could drive up the price of the premiums that you pay. Or, you may have experienced an unexpected financial issue—like increased medical expenses, legal issues, assisted living costs, or tax issues. Or, you are tired of paying premiums for a policy you no longer need. With a life settlement, you can eliminate all future premium payments.
FUNDS ARE NEEDED TO PAY FOR MEDICAL CARE OR SOME OTHER EXPENSE
Faced with economic changes or hardships, selling your policy to recoup the equity you have built over the years is a viable option to fund a significant expense. A few examples of these significant expenses could be funding assisted living, cancer treatments, or medical costs or premiums on another existing policy. Pursing a life settlement can free up some money to ensure these expenses are taken care of.
YOU WANT TO RE-INVEST THE EQUITY YOU’VE BUILT TO TAKE ADVANTAGE OF A BETTER OPPORTUNITY
You may want to recapture the money you have paid over the years into your life insurance policy. Whether it is investing in a business, purchasing a new home, paying off a debt or tax liability, purchasing an income-generating annuity, or taking advantage of another financial opportunity, getting a life settlement could help achieve these goals. These are all options where the equity built in your insurance policy could better work for you and your current circumstances.
YOUR LIFE CIRCUMSTANCES HAVE CHANGED
As we move through the various stages of life, many individuals find they simply no longer need a life insurance policy, or simply want cash now. Life changes such as divorce, retirement, the absence of an estate tax burden, or beneficiaries no longer requiring the policy benefits are potential reasons to consider selling a policy.
Life Settlement Terminology
In order to help you fully understand the process, we have defined some of the relevant terms that you may encounter when getting a life settlement:
Beneficiary
The person who is designated to receive a life insurance policy’s death benefit upon the insured’s death.
Cash surrender value
Also known as cash value, this is the amount the policyowner receives if they surrender the life insurance policy to the insurance company before a death benefit is paid.
Convertible term life insurance
A type of term life insurance that can be converted to permanent life insurance within a specified time frame
Death benefit
The amount of money the policy’s beneficiaries receive from the policy upon the insured’s death.
Face value
This is another name for death benefit, the amount of money the policy’s beneficiaries would receive from the policy upon the insured’s death.
Illustration
Projections about the future premiums that must be paid on a life insurance policy over the insured’s lifetime, or for a term life policy, during the policy’s term. Illustrations are provided by the insurance company.
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Term life (TL) insurance
A type of temporary life insurance that provides coverage for a pre-defined period of time (the policy term): for example until the age of 75. The premiums may remain level or increase annually.
Universal life (UL) insurance
A type of permanent life insurance that includes a savings component that accrues cash value. While universal life policies generally have lower projected premiums than whole life policies, the annual cost of insurance (COI) is not fixed and goes up over time.
Whole life (WL) insurance
A type of permanent life insurance that includes a savings component that accrues cash value. Premiums for whole life policies are fixed and guaranteed. Once issued, a whole life policy is guaranteed to remain in-force for the insured’s entire life (provided premium payments are made on time), or until the policy matures.