Life Settlement: Get Your Quotes in Minutes
When a life insurance policy owner has an insurance policy with built up cash value (i.e. a whole life, variable life, or universal life policy), but no longer wants the policy, he has two options: cash in the policy for the built up cash value; or sell the policy to a third party for more than the cash surrender value offered by the life insurance company. The buyer is then the new beneficiary of the policy at maturation and is responsible for making all future premium payments. A life settlement is much different from a viatical settlement.
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A viatical settlement is the sale of a life insurance policy at a price below the death benefit, but higher than the surrender value, which is similar to a life settlement. But vitical settlements usually are sold by those who have a shorter life expectancy, and are looking for additional cash to use during their lifetimes. A life settlement is usually done because the seller has been able to self insure, and no longer needs the death benefit.
On the other side of the transaction, a buyer of a life settlement is usually looking for entry into a favorable insurance policy at a good price, because they need the death benefit for their beneficiaries. The buyer of a viatical settlement is usually doing so as an investment. The shorter the seller's actual life as compared to their expected life, the greater the profit to the buyer.
A life settlement policy usually has a death benefit of between $1 million and $3 million, with a cash value of less than $100,000, but a settlement value of at least $500,000. That is, they are transaction usually entered into by someone who is already financially secure.
