Life Settlements

Just like any personal property, a life insurance policy can be sold or “settled”. This is called a life settlement.

The idea is to sell an existing life insurance policy to a third party for more than its cash surrender value but less than its net death benefit. In a life settlement transaction, the policy’s owner transfers ownership of the policy to the buyer in exchange for an immediate cash payment and, in some instances, a reduced interest in the death benefit for the policy’s beneficiaries. The buyer of the policy pays all future premium payments and receives the death benefit upon the death of the insured (when the policy matures).

A life settlement is different from a viatical settlement in that the individual insured on the policy has a longer life expectancy. In a viatical settlement, the life expectancy of the insured is 24 months or less.

Who Qualifies for a Life Settlement?

Anna gets over a half million dollars for her client

Why Consider a Life Settlement?

Prevent a Policy Surrender or Lapse

Prior to letting a policy lapse or surrendering a policy back to the insurance company for the cash surrender value, a life settlement can provide a lump sum cash payment equal to the fair market value of your life insurance policy.

Premium Payments Have Become Unaffordable

Once a life settlement transaction is completed, the seller no longer pays premiums and the investor, or purchaser, takes over making the payments and receives policy proceeds upon death of the insured.

Coverage is No Longer Needed or Wanted

The original purpose for owning a life insurance policy may no longer be applicable today. Should a life insurance policy no longer be needed or wanted, a life settlement is a valuable tool to get cash for your policy and recoup premium dollars paid into the policy.

A More Suitable Financial Investment is Desired

Suitability to own a life insurance policy can change over time. Life insurance is a unique asset that requires funding to maintain the coverage. If the policy owner would rather use their cash for other investments versus paying premiums, a life settlement may be a great financial decision to put their cash to work in other assets that don't require funding to keep the policy in force.

Changes in Estate Tax Laws

With the new federal estate tax exemption amounts up to $11.58 million for an individual ($23.16 million for a couple), the financial protection to pay estate taxes may no longer be necessary. Selling your life insurance may be an excellent option for individuals who no longer need to worry about paying federal estate taxes.

The Life Settlement Process

The life settlement process can take up to four months from the time the completed application is received to receipt of payment. EnTrust Settlements keeps you updated throughout the entire process.

Featured Stories

Christa received $182,500 for a policy that had no cash value and was projected to lapse within 6 months

Christa managed a Guaranteed Universal Life policy for her client. Premium payments were suspended several years earlier as her client could no longer afford the payments. The policy was projecte...

Steve sells a life insurance policy to help fund another, more cost efficient policy.

Steve's mother owned two life insurance policies. She couldn't afford to make the required premium payments on both policies so they were taking out loans on one policy to make premium payments fo...

Anna gets over a half million dollars for her client

Anna's client took out a life insurance policy to plan for estate taxes over ten years ago. The family's business took a turn for the worse and they had not paid a premium since 2010. The policy ...

Trust Officer's awareness of the Life Settlement Option gets client $350,000 above surrender value

Bill, a trust officer, identified a policy to be significantly underfunded and the grantor had not paid a premium since 2005. The projected annual premium to mature the policy was $84,020 and with...

Frequently Asked Questions

What exactly is a “life settlement”?

A life settlement refers to the sale of an unwanted, unneeded, or unaffordable life insurance policy by a senior, typically over the age of 70, to a licensed purchaser for a price greater than the cash surrender value of the policy.  The purchaser is responsible for making any future premium payments and receives the full death benefit upon the death of the insured.

What are some of the reasons why I might consider the sale of my policy?

Some of the reasons why you might consider selling your life insurance policy include:

  • Premium payments have become unaffordable
  • Coverage is no longer needed
  • Beneficiaries no longer need the financial protection
  • Policy surrender or lapse is being considered
  • Cash is needed to pay emergency expenses
  • Another more suitable financial investment is desired
  • Changes in estate tax laws
Do I qualify for a life settlement?

Purchasing parameters vary by Provider, but typical candidates are:

  • Insured(s) age 70 and older (under 70 may qualify with known health issues)
  • Policy face value of $100,000 or more
  • All types of life insurance policies may qualify
How much money will I get if I sell my life insurance policy?

There are many factors that will determine the amount of an offer including, but not limited to:

  • The age and medical condition of the insured
  • Type of life insurance policy (e.g., universal life, whole life, term)
  • Amount of the death benefit
  • Amount of premiums necessary to keep the policy in force
  • Rating of the issuing insurance company
  • General market supply and demand
Are there any fees or costs involved in a life settlement?

Yes.  The costs associated with the sale of a policy are included in the purchase offer.  A fee is paid to EnTrust Settlements for consultation, the cost obtaining medical records, life expectancy reports, negotiating multiple offers from qualified buyers, appropriate licensing, among other requirements.  If a policy does not settle or if EnTrust determines a life settlement is not feasible, no costs will be incurred.

How long does the process take?

Most life settlement transactions take around 3 to 4 months to complete from the time the decision is made to receipt of payment.

Who is purchasing my policy?

Life settlement Providers serve as the purchaser in a life settlement transaction, on behalf of the funder.  Providers must meet licensing requirements in the state where the policy owner resides in order to purchase a policy in that state.  A funder is an institutional investor, lender, accredited investor or special purpose entity that purchases a life insurance policy through a life settlement Provider.  Funders are usually large institutions such as hedge funds, investment banks, insurance companies, and registered funds that buy life settlements as an investment.

What happens to the policy after I sell it?

The purchaser becomes the owner and the beneficiary of the policy, is responsible for making any future premium payments, and receives the full death benefit upon the death of the insured.   You have no obligations to the policy, but the insured may be required to periodically provide the purchaser with information which may include current health status.

Are life settlements regulated?

Yes, today at least 42 states and the territory of Puerto Rico have regulations in place, with legislation pending in additional states.  If a life settlement involves the sale of a variable life insurance policy, the sale is regulated by the SEC and FINRA.

Are the proceeds of a life settlement taxable?

The taxation for a life settlement transaction can be complicated.  EnTrust strongly recommends that a policy owner seek professional tax advice prior to accepting any offers.

Is a medical exam required?

No, a medical exam is not required.  However, you will be asked numerous questions about your health status and will be required to sign a release for medical records.

What happens if I change my mind or if the insured dies shortly after I sell my policy?

Most states have a rescission period in which you can change your mind.  This will vary by state, but a typical rescission period is before the earlier of 30 calendar days after the date upon which the life settlement contract is executed by all parties or 15 calendar days after the receipt of the life settlement proceeds by the seller.

If the seller dies within this rescission period, the life settlement contract will be cancelled.  The Provider will owe the seller or the seller’s beneficiaries any proceeds it receives from the policy, subject to repayment of all life settlement proceeds and any premiums, loans, and loan interest being made to the Provider within the rescission period.

Who qualifies for a life settlement?

Insured(s) age 65 and older
Policy death benefit of $100,000 or more
Policy is more than two years old
May require change in health since policy was issued

Contact us to find out if your policy qualifies

Not all life insurance policies qualify for a life settlement. EnTrust Settlements can determine if your policy is marketable with a Preliminary Life Settlement Evaluation. Contact us today and find out if your policy qualifies at no cost.