How it Works

Educate Yourself

If you have a life insurance policy you cannot afford or no longer need, it is vital to learn all available options. Selling the policy in a life settlement is just one of the options as part of your financial toolkit that you should review. If applicable, you may be able to take out a loan against the policy or apply for an accelerated death benefit. You can transfer the policy to a relative or do a deep dive into the cost of insurance, thereby making your premium payments more manageable in the short term.

After reviewing all your options, you may want to move ahead with a life settlement. At this point, you should educate yourself on the process. You will likely have many questions about life settlements, and you should get answers before selling your policy. Most importantly, it would help if you made this decision with a cool head and not feel pressured to make a quick decision.

See If You Qualify

Not all policies qualify. Your policy will not qualify for a life settlement if you are young (under 60) and in relatively good health. There are criteria that determine whether or not you are likely to find a buyer for your life insurance policy. 

The eligibility for a life settlement is primarily dependent on the following criteria:

  • Age: Generally, individuals over 65 will qualify for a life settlement. This requirement is not absolute, and younger insureds may qualify depending on their health. 
  • Health: If your health has deteriorated from when you first purchased your policy, you will be more likely to qualify for a life settlement. Buyers price policies based on life expectancy; if the insured’s health is compromised, the more likely a buyer will be to pay for the policy. If the insured has a life expectancy of twenty-four months or less, the insured will qualify for a viatical settlement with added tax advantages. 
  • Policy: Policies with face values over $100,000 are much more likely to attract buyers than policies with smaller coverage amounts. The reason is that selling a life insurance policy is highly regulated, and a lot of paperwork goes into the sale. Buyers may be unwilling to go through the process for smaller policies.
  • Policy Type: Permanent life insurance policies, such as whole life or universal life, are often eligible because they provide coverage with no expiration date. Term policies may not qualify unless they come with a conversion privilege that allows the policyholder to convert to a permanent life policy. Term-life policies that don’t have a conversion privilege will have a more challenging time finding a buyer.  

Life Settlement Application

When you decide to proceed with a life settlement, you must complete a life settlement application. The application process is relatively simple but may require some documentation about your policy and your medical records. Providing accurate information on the application is important, as any discrepancies may delay the process or impact the amount of money you receive.

Once your application is submitted, a buyer or a broker will review it, and they will advise you on the next steps. If you meet the qualifications and your policy can be sold, the buyer or broker will ask you to gather or help them gather additional information to take the life settlement process to the next step.

Gather Necessary Information

For buyers to correctly price your policy, they will need your policy details, including a policy illustration and a copy of the life insurance policy itself. They will also ask you for your medical records, including any medication you are taking, doctor visits, and medical procedures you may have had. These details help buyers determine your life expectancy, allowing them to make you a fair offer. The faster they access this information, the quicker you can submit a complete package to a life settlement buyer for review.

Buyers Review & Make Offer(s)

After collecting the information, you must submit everything to a buyer directly or through a life settlement broker. The buyers will review all the information together with a team of actuaries who specialize in life settlements and medical professionals who can help the buyer understand the insured’s life expectancy. Many factors go into the price a buyer is willing to pay for a policy, including future premiums owed in the policy, the insured’s health, and the policy’s face value.

After the review, they will make you an offer. This offer can range anywhere from 3% of the face value to 80% of the face value of your policy.

If you accept the offer, the buyer will put the total offer amount in escrow, and you will move to the closing stage. If you choose not to accept the offer, there is no obligation to do so, and you can withdraw your application at any time.

Closing Process 

The closing process is tedious, and you will have to sign quite a few documents. The government is aware that a life insurance policy is a valuable financial asset, and they have put together regulations that protect and safeguard the interests of the seller. A licensed provider will facilitate the sale to comply with applicable laws. After the seller signs the documents, the life settlement provider reviews and approves them. If everything is correct, the policy will be transferred from the seller to the buyer. After the transfer, the money will be released and wired into the buyer’s account.

Rescission Period

After the sale, some states have a rescission period where the buyer can cancel the contract. Some buyers may have seller remorse and want to keep their policy. The seller or broker must notify the buyer within a specific period (usually 10-30 days). In that case, the seller can request to cancel the sale without penalty and receive a refund of their policy. After the rescission period, the sale is final, and unless both parties agree, they cannot cancel the sale.  

Future Contact

In the signed closing documents, the buyer will sign a limited power of attorney (LPOA) and agree to allow the buyer to periodically check in on them and review their medical records in the future. All buyers require this, enabling the buyer to know how their investment is doing. The state regulates the number of times a buyer or their representative (life settlement servicer) can reach out to the buyer. In many states, a life settlement buyer or servicer cannot reach out more than once a quarter to check on the insured. 

Resources For Education

Many resources are available for learning about life settlements and how they work. To start, you can visit reputable life settlement websites with a wealth of information about the life settlement industry and resources available to seniors considering a life settlement. You can also visit financial websites or consult with a trusted financial advisor.

Sell your life insurance policy for cash.

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