Life Settlements Explained
Considering a Life Settlement?
Turn an unneeded life insurance policy into cash—without letting it lapse or surrendering for less.
Life settlements explained: A life settlement is the sale of an existing life insurance policy to a third party for a cash payout. Instead of lapsing or surrendering a policy for a minimal amount, you can capture its fair market value today and use the funds for retirement income, healthcare, long-term care, or other goals. As a family-owned, fiduciary agency licensed in all 50 states, Diversified Insurance Brokers helps you compare options from 100+ carriers and make a clear, confident decision—without product bias.
How a Life Settlement Works
Sell the policy, stop premiums, receive a lump sum
You sell your life insurance policy to a licensed buyer who becomes the new owner and beneficiary. They take over premium payments; you receive a lump sum that’s typically more than surrender value and less than the death benefit. The buyer’s return is the future death benefit. This can be attractive if your need for coverage has changed, premiums feel heavy, or the policy is at risk of lapse.
Many clients evaluate settlements alongside other strategies like annuities, long-term care planning, or repositioning cash value within life insurance. We’ll model scenarios so you can see trade-offs clearly.
Who Qualifies?
Key factors that drive eligibility and offers
- Age: 65+ is common; younger insureds may qualify if health has materially changed.
- Policy type: Universal life, whole life, some variable policies, and convertible term (once converted to permanent).
- Face amount: Policies of $100,000+ tend to be more marketable.
- Health & life expectancy: Offers are typically higher when life expectancy is shorter (lower premium outlay and sooner payout for the buyer).
- Premiums & costs: Affordable ongoing premiums can improve buyer interest and the net offer.
Want a quick read on eligibility? Use our button above to start your life insurance policy review, or speak with us at 800-533-5969.
Value, Pros & Cons
Why people choose a life settlement—and when they don’t
- Pros: Immediate liquidity, relief from premiums, higher value than surrender, redeploy cash to current priorities.
- Cons: Beneficiaries lose the death benefit; proceeds may be taxable; not every policy qualifies; underwriting and closing take time.
We’ll also compare with keeping or restructuring coverage, including potential 1035 exchanges or exploring a life insurance alternative if that better fits your goals.
Payout Ranges & Taxes
What affects your offer and after-tax proceeds
Settlement offers vary based on face amount, policy costs, carrier strength, policy type, health, and competition among buyers. We create a bidding environment to help maximize value.
Taxes: A portion of proceeds may be taxable depending on basis and payout. We’ll summarize the potential tax treatment and coordinate with your tax professional so there are no surprises.
Timeline & the Step-by-Step Process
Typical 30–90 day workflow
- Discovery call: Policy snapshot, goals, and eligibility indicators.
- Document review: In-force illustrations, statements, and policy pages.
- Market to buyers: We invite offers and negotiate.
- Select an offer: You approve terms in writing.
- Closing & transfer: Ownership and beneficiary change; funds are disbursed.
Prefer a guided walk-through? Book a quick consult in the scheduler below.
Alternatives & When to Keep Coverage
It’s not always about selling—sometimes it’s about optimizing
- Keep the policy: If protection remains essential (spouse, special-needs planning, business needs), we may improve efficiency instead.
- Reduce or restructure: Lower face amount, adjust funding, or pursue carrier reconsideration if health improved.
- Convert term: Use guaranteed conversion features before the window closes.
- Explore other strategies: Compare with lifetime income options or cash-flow planning.
If selling is best, you might also like our page: Sell My Life Insurance Policy.
What Documents to Gather
Bring these for a faster evaluation
- Policy contract and any amendments/riders
- Recent annual statement or in-force illustration
- Premium schedule/billing notices
- Any correspondence on conversions, loans, or changes
Need a hand tracking these down? Start the process via our quick contact page and we’ll guide you.
FAQs: Life Settlements
What types of policies qualify?
Universal life, whole life, some variable policies, and convertible term (after conversion). Eligibility and value depend on face amount, premiums, and health.
Will my beneficiaries receive anything if I sell?
No—the buyer becomes the beneficiary. If legacy is a priority, we’ll discuss ways to keep some coverage or replace a portion efficiently.
How long does the process take?
Most cases close in 30–90 days, driven by underwriting, buyer interest, and timely paperwork.
Are life settlement proceeds taxable?
They can be. Tax treatment depends on your cost basis and payout. We’ll outline considerations and coordinate with your tax professional.
Can I sell only part of my policy?
Sometimes. Partial settlements can provide cash while you retain reduced coverage. Availability depends on policy and market interest.
What if my health has changed since issue?
A material change can increase market value. We’ll document current status and present your case to competitive buyers.
Schedule a Life Settlement Review
Pick a time for a 15–20 minute consult. We’ll review your policy and outline options in plain English.
Prefer a call? Speak with an advisor at 800-533-5969.
Related pages: Sell My Life Insurance Policy • Life Insurance Services • Life Insurance Alternatives • Annuities • Long-Term Care • Contact Us
