Types Of Life Insurance Options

Life insurance transactions can come in different forms. Not all states or cases will necessarily allow for any particular type. Usually, the seller of a policy determines which type of life settlement is the best solution for their circumstances.

For informational purposes, here are the most common types of transactions:

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Traditional

This is the most common life insurance option and is typically what comes to mind when one thinks about the transaction.

In this case, a licensed provider (aka the buyer) will pay the policy owner a cash amount above the surrender value but below the death benefit.

The premiums will then be paid by the buyer or its financing entities for the remainder of the insured’s life.

This entity will receive the face value of the policy upon the death of the insured. The seller received all possible benefits from the policy and they will receive nothing at the time of the insured’s death.

  • Cash Lump Sum Now
  • No Future Payments
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Retained Death Benefit

In a retained death benefit, the licensed provider or its financing entity will take over only the policy premiums for the seller.

The seller will receive no cash now. The policy beneficiaries will be assigned a retained death benefit amount directly from the insurance carrier which will be paid upon the death of the insured.

This amount is usually much more than what the seller receives in a traditional option.

The original owner will no longer be required to pay the premiums and will receive no cash now, but will receive a portion of the death benefit from the insurance carrier at the time of the insured’s death.

This option could be beneficial for those who find the premiums to be too expensive but still want their beneficiaries to receive a portion of the death benefit.

  • Guaranteed Percentage at End of Policy
  • No Future Payments
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Hybrid

In this option, the policy sellers can receive a combination of traditional life options and retained death benefits.

With this option, you receive a cash payment now, your beneficiary receives a guaranteed percentage of the benefit when the policy ends, and you have no further obligation to pay future premiums.

This can provide some needed cash now and retain some death benefit for the family or trust.

  • Guaranteed Percentage at End of Policy
  • Cash Lump Sum Now
  • No Future Payments
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