What is a Life Settlement?
A life settlement is the sale of a life insurance policy to a third party for a lump-sum, cash payment of less than the face amount but for more than the cash surrender value offered by a life insurance company.
Life settlements represent an important solution for a growing number of people who thought they were stuck with a life insurance policy they no longer need. Many people don’t realize a life insurance policy is their personal property that can be sold.
Picture this: If you purchased a house and there was a clause in your contract where the builder said: “You may only sell the house back to me and nobody else.” You could walk away from the house and receive nothing for it, or you could sell it to the builder, who would likely not be willing to offer you fair value for the house.
Wouldn’t you rather have had a free market and have people offer you what the house is really worth?
In the life settlement industry, that’s exactly what we now have for life insurance. Rather than walk away from the policy or take a below-market bid from a life insurance company, policy owners now receive fair value for the policy through an auction process.