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What is a Life Settlement?

In terms of definition, a life settlement is the financial transaction of an existing life insurance policy to a licensed life settlements buyer for more than its cash surrender value, but less than its death benefit. 

The policy owner transfers ownership and beneficiary rights to an institutional investment fund.

The insured receives a lump-sum cash payment that can often be 4 to 6 times greater than the cash surrender value in exchange for transferring ownership. 

The money belongs entirely to the policy seller and can be spent at their discretion. Life settlements can also be in the form of a paid-up death benefit.

Can I Sell My Life Insurance Policy?

Yes, you can sell your life insurance policy through a life settlement—your life insurance policy is your property, which entitles you to sell if you choose to do so. 

The average payout of a life insurance sale is 4-6 times the policy’s cash surrender value. 

To get started with wanting to sell your life insurance policy, you will first need to see if you meet some minimum qualifying factors, such as: 

  • Own a policy with a $100,000 or more in death benefit – anything less than that typically does not qualify, unless there are considerable health impairments 
  • Life insurance policies generally qualify if you are over age 70 
  • A decline in health from the time when the policy was issued may help better your chances to qualify, but it is not necessary 

Because each life settlement case is distinctive, these factors should only be seen as general guidelines.