Until recently, people with unwanted life insurance would either: 1) Let their policy lapse when they couldn't pay for it or 2) Surrender the policy back to the insurer for the cash surrender value.
However, Life Insurance Settlements – also known as Life Settlements or Senior Life Settlements – are a new type of financial service being popularized by specialized brokerages. These brokerages sell your life insurance policy to institutional investors for typically three to five times the cash surrender value of the policy.
Life Insurance Settlements are a new but fast growing service. Since 2001, over a billion dollars in excess of the cash surrender value has been paid to senior citizens who chose to sell, rather than lapse or surrender their life insurance policy. But many more could benefit from this product. According to the American Council of Life Insurers, almost nine out of ten universal life insurance policies are lapsed or surrendered. Furthermore, it is believed that 99 percent of term life insurance policies are lapsed without ever paying a death benefit.
Typically a Life Settlement broker can sell your policy to investors for a much higher price than the cash surrender value paid by the insurer. And, when done efficiently and according to industry best practices it is a great opportunity for everyone involved:
- The life insurance policy seller collects a larger settlement than the surrender value for an unwanted insurance policy.
- The life insurance policy buyer obtains a valuable contract with a life insurance carrier that will pay out a death benefit sometime in the future.
- The insurance company continues to collect premiums (as paid by the buyer).