What is a life settlement?
A life settlement is the sale of an individual life insurance policy to a group of investors. The settlement amount depends on several factors, but the owner of the policy is offered a specific cash amount that will be less than the face amount and greater than the accumulated cash value (if there is any cash value). Investors will buy both term life insurance and permanent life insurance policies – a term insurance settlement will require a conversion to a permanent policy before the sale. All rights to the policy are assigned to the investors, and the investor will continue to pay the premiums for life. Upon death, the investor is entitled to collect the death benefit.
When should I consider selling my life insurance policy?
- When the policy is going to be terminated or surrendered for cash value
- When a policy is being replaced – use cash from the settlement to buy a new policy
- When a charity owns a policy and can’t afford the premiums any longer
- When a key man or key person is retiring and no longer needs the coverage
- When a business-owned policy is no longer needed
- When there is no longer a need for life insurance
How much can I sell my life insurance policy for?
There are several factors considered by the settlement companies in evaluating how much your policy is worth. They will base their offer on the following:
- Age – generally, the insured must be at least 65 years old
- Policy amount – investors prefer policies that are $1 million or greater, and are willing to buy policies with a face amount up to $20 million. The minimum policy amount is usually $100,000.
- Life expectancy – the investors will evaluate the insured’s life expectancy through interview questions and/or medical records. Shorter life expectancies receive higher cash offers.
- Premium required to keep the policy in force until age 100
- Policy must be at least two years old and out of the contestability period
How does TermInsuranceBrokers assist in the sale of my life insurance policy?
TermInsuranceBrokers helps shop your policy among a number of different investment groups to make sure you receive the highest possible offer. The range of offers from each company can be significantly different, and it’s important to know that you are getting a fair and reasonable offer. If you would like to get a specific offer for your life insurance policy, please give us a call at 1-800-571-2980 any time from 9 AM to 9 PM eastern time or send us an e-mail at [email protected] 24 hours a day! We look forward to helping you.