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What is a Life Settlement?

A life settlement is the sale of an existing life insurance policy that is no longer needed or wanted. Many life insurance policies are purchased at a time in life when coverage is necessary but as life changes so do the needs for life insurance. A life settlement pays a lump sum to the policy owners verses simply allowing a policy to lapse. This can occur when it is determined that the reason the policy was originally purchased has changed making the coverage unneeded. A current valuation of the policy is done by an experienced life settlement valuator and a valuation (the settlement amount) is calculated as a percentage of the net death benefit. The settlement amount can be significant depending on the age and health of the insured, policy size, accumulated cash value and future premium costs.


The most common reasons for selling a policy are:


A policy is no longer needed or wanted

The beneficiaries no longer need the protection

An estate has decreased in size

Premiums are no longer economically viable

The business owner is selling their business

A non-profit wants liquidity

To provide cash for more timely purposes

Who Qualifies for a life settlement?


Insured 65 or older

Policy death benefits $100,000 or greater

A change in insurability since issue

Most policy types can qualify but Universal Life is most common

The factors on how each valuation is determined are numerous.


What Matters For Life understands how to evaluate and analyze these various factors.


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