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5 Things You Need to Know About Life Settlements

By Ashley Fabia October 30, 2021 Managing Money

With a life settlement you sell your life insurance for cash that can be used and enjoyed while you’re alive. Most people misunderstand and misrepresent life settlements. By relying on incorrect information, you could hinder your ability to pursue appropriate financial strategies or even realize the full value of your life insurance policy.

Here’s how you can look at it. Your life insurance policy is a valuable asset. Life settlements should be understood and handled correctly so that you can maximize that asset’s value.

What Is a Life Settlement?

Life settlements involve the sale of an insurance policy for cash. When the transaction closes, the buyer assumes responsibility for the policy and its premiums. Typically, life settlements are available to seniors aged 65 or older who have policies worth $100,000 or more. Getting a policy review from a reputable life settlement company will allow you to check your own eligibility.

An important advantage of life settlements is their large cash payouts. For example, your policy’s market value should be several times greater than its surrender value. Also, the proceeds of a life settlement are not restricted in any way. Part of your take will probably be taxed, but the remainder can be spent however you wish.

If you are looking to sell your life insurance policy – and get the highest payout possible – here are five vital life settlement facts you need to know.

The Life Settlement Industry Is Legal and Regulated

Contrary to common misconception, life settlements are legal, regulated transactions. In the same way that a home is sold, there is a legally defined process to transfer ownership of life insurance. The process assures transparency, protects the rights of the parties, and ensures that the transaction is valid.

It Is Not a Requirement to Be Ill to Sell Your Life Insurance

Those in good health take advantage of life settlements for one major reason: They have the time to enjoy those unrestricted cash proceeds. A life settlement can be used for many things including traveling the world, funding bucket-list experiences, retiring early, setting up college funds for grandchildren, and/or increasing your charitable donations.

There is also the option to sell life insurance for chronically or terminally ill individuals through a different process called a viatical settlement.

It Is More Profitable to Sell Your Policy Than to Surrender It

Your life expectancy, death benefit value, and policy’s premiums all play a role in the market value of your life insurance policy. Nevertheless, you’ll receive a lot more from a settlement than from surrendering your life insurance. You could get up to four times your cash value or as much as 60% of your death benefit.

You Can Choose Between Working with a Provider or a Broker

To sell your policy, you have the option of working with a life settlement broker or a life settlement provider. It is helpful to know the differences. Brokers are responsible for marketing your life insurance policies to multiple buyers in order to get you the best price possible.

It is your broker’s fiduciary responsibility to serve your best interests and represent your best interests. A broker does charge a commission – they deduct it from sale proceeds – but you should still come away with more cash.

Providers, also known as direct buyers, allow you to sell to a buyer directly which means the proceeds of the life settlement transaction is completely yours.

You Are in Charge of Your Life Insurance Policy

It’s up to you how you use your life insurance policy at the end of the day. For example, you could work with a broker or provider. Alternatively, you could get a value estimate for your policy and decide not to sell just yet.

Consider all of your options before you commit to any decision. You may or may not find it in your best financial interest right now to sell your life insurance. This can only be determined by examining your policy’s market value and premiums, along with your financial and lifestyle goals.

Take Control of Your Future

A life settlement is one of the best and most flexible ways to liquidate life insurance. You may want to consider a life settlement if you don’t need insurance anymore. Why not maximize the return on the premiums you have already paid?

It would be beneficial to calculate the value of your life insurance anyway, even if you are not interested in selling it today. Obtain an instant estimate with a life settlement calculator or by contacting a reputable life settlement company.

Have you maintained a life insurance policy? Have you wondered what to do with it when you no longer need it? Did you know you have the option of a life settlement?

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The Author

Ashley Fabia is a Marketing Specialist at Abacus Life Settlements. In her work, Ashley has helped thousands of seniors secure their retirements, find value in their lapsing policies, and pay for their dream vacations. Learn more about Life Settlements and Viaticals at abacuslifesettlements.ccom

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