Understanding Life Settlements

Obtaining more value for your life insurance policy begins with education.

Is a Life Settlement the Right Choice?

A Life Settlement is a financial transaction in which the owner of an existing life insurance policy sells the policy to a third party for a negotiated price that exceeds the cash surrender value offered by the insurance company.

Proceeds from a life settlement can be used in any way and are often used by policy holders, together with their financial advisors, to fund other financial products. Today they represent a unique, dynamic planning tool that can help further an individual's financial goals and well-being in many ways.

A Life Settlement allows the policy owner to utilize life insurance as an asset while the insured person is still alive. A policy owner elects to sell their policy for many reasons. Among the prominent reasons:

  • The policy is no longer needed, wanted, or is about to lapse.
  • The premiums are no longer affordable.
  • Death of the policy beneficiary.
  • Cash needs have increased or changed.
  • Way to supplement retirement savings.
  • Way to fund medical or long term care.

Just as people choose a Life Settlement for many different reasons, there are a wide variety of benefits to selecting a Life Settlement. Some benefits include:

  • Provide significant cash value above stated policy cash surrender value.
  • Allow for the purpose of a less expensive single life, survivorship, annuity, or long-term care policy.
  • Generate cash for an emergency or other imperative reason.
  • Make available funds for the potential enrichment of one’s financial portfolio and well-being to capitalize on new investment opportunities.
  • Gain greater peace of mind knowing that further premiums need not be paid by the policy owner of an insurance policy that no longer serves one’s needs.


The unique characteristics and tangible advantages of Life Settlements are often mis-understood. LifeTrust has provided clear answers to some of the most common questions.


Are Life Settlements legal?
Yes, the U. S. Supreme Court ruled in 1911 that your insurance policy is an asset and may be bought or sold.


What types of life insurance policies can be sold through a life settlement?
All types of insurance policies can be sold including term and convertible term, universal, whole life, variable, and second to die. The most attractive types for buyers in the current market are universal life and convertible term.


What happens to the policy after it is sold in a life settlement?
Once sold, you will no longer make any additional premium payments to the policy. All the rights and ownership of your policy are transferred to the new owner.


Are there any out-of-pocket expenses or medical exams associated with a life settlement?
With LifeTrust, there are NO out-of-pocket expenses and you do not need a medical exam.


Do I have to sell my entire policy?
No, it’s possible to only sell a portion of your life insurance policy. In this scenario, the rights of the sold portion are transferred to LifeTrust.


How long does it take to sell my life insurance policy?
It generally takes about 7 to 10 weeks to complete the entire life settlement process. Much of the process time depends on how quickly your insurance company takes to change ownership and beneficiary of the policy to the new owner.


Are the proceeds from selling a life insurance policy taxable?
Your life insurance proceeds may be taxable based on how you decide to structure the transaction. We highly recommend that you seek the assistance of a professional tax advisor to determine how the proceeds affect your individual or corporate tax situation.

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