What You Need to Know

Life Settlement Companies

Before surrendering your life insurance policy, learn how a life settlement companies can get you much more than your policy’s surrender value.

Life Settlement Companies and Selling Your Life Insurance Policy

Universal life insurance policies build value with every premium you pay, but what happens when you can no longer afford to pay the premiums or you simply don’t need the policy anymore? Surrendering your policy to your insurance company is one option, but this usually comes with a very low settlement and a hefty surrender fee that may be $10,000 or more.

A life settlement can be a smart solution to help you access a lump sum of cash from the life insurance policy you can’t afford or no longer need. As a policyholder, you own your life insurance policy and have the right to sell it, usually for a much higher value than you can receive by surrendering the policy to your insurer.

How Selling Your Life Insurance Policy Works

The first step to selling your life insurance policy involves providing information about your policy and your health and completing an application that includes medical records. The settlement company will have your records reviewed by an independent company to calculate probable life expectancy, which is factored into the offer you will receive. Your policy will also be analyzed based on the premium expense, death benefit, and the ratings of your insurance company.

You will receive a formal settlement offer from the Life Insurance Settlement Association that you can accept or decline. This offer will be higher than the cash surrender value of your policy but lower than the policy’s death benefit. If you accept the offer, the transaction will be finalized, and you will receive a cash settlement. Your insurance company will be notified of the change of ownership and beneficiary.

Who Qualifies for a Life Settlement?

There are usually just a few general guidelines you must meet if you are ready to explore selling your policy through life settlement companies. You generally must have a permanent life insurance policy such as universal life, whole life, convertible term life, or survivorship universal life.

In most cases, you must also be at least 65 years old. Your health, age, the face value of your policy, and the number of premiums to keep the policy in force will all play a role in determining the settlement amount that you are offered.

Before allowing your policy to lapse or surrendering it to your insurer, consider your options. Life settlement companies can help you receive a cash settlement much larger than your policy’s cash surrender value.