Life Settlements: What They Are & How They Work

By Brent Meyer — SafeMoney.com Founder & Editor Reviewed by Licensed Financial Professionals  |  SafeMoney.com — Trusted Since 2011  |  Updated Regularly Quick Answer: A life settlement lets you sell your life insurance policy for more than its cash value. Learn when a life settlement makes sense and what retirees need to know. Related Articles Life Insurance For Seniors | Life Insurance Roth Ira Vs Life Insurance | Life Insurance The Role Of Life Insurance | Life Insurance 5 Life Insurance Myths | Life Insurance Key Takeaways Life settlements can provide cash for retirees needing funds beyond their policy's cash value. Consider a life settlement if your insurance needs have changed significantly. Evaluate your options using retirement calculators to assess financial impact. Consult a SafeMoney certified advisor for personalized guidance on life settlements. Life settlements can be a strategic part of your retirement plan, offering liquidity and flexibility. Quick Answer A life settlement allows you to sell your life insurance policy to a third party for a cash payment greater than its surrender value but less than its death benefit. This transaction is regulated and can provide retirees with a significant financial resource. SafeMoney Editorial Team  |  Reviewed by Licensed Financial Professionals  |  Updated Regularly Understanding Life Settlements Life settlements offer a unique opportunity for policyholders to leverage their existing life insurance policies for immediate financial gain. This option can be particularly beneficial for retirees who no longer need their policies or face financial challenges. By selling a policy, individuals can receive a lump sum that exceeds the cash surrender value, providing a valuable resource for retirement planning. How Life Settlements Work The life settlement process involves several key steps: Policy Evaluation: A licensed provider assesses the policyholder's age, health, and policy details. Policies of those with shorter life expectancies often receive higher offers. Market Bidding: Eligible policies are presented to potential buyers who bid based on expected returns. Sale and Transfer: Upon accepting an offer, the policy's ownership is transferred, and the seller receives a lump-sum payment. Payout: The buyer pays premiums and collects the death benefit upon the insured's passing. Benefits and Considerations of Life Settlements Life settlements can provide significant