What is a Life Settlement? Everything Seniors Need to Know

Clock August 03, 2020


More and more seniors are looking into life settlements. Whether due to financial hardships, medical bills, or planning for retirement, life settlements allow seniors to generate money from the sale of their life insurance policies.

“Your life insurance policy is your property,” says Michael Freedman, CEO of Lighthouse Life. “Because of this, you have more choices than simply lapsing or surrendering a policy you no longer want or need.

Senior woman in red sweatshirt learning what a life settlement is

“You can use the proceeds from a life settlement for anything you want, including paying bills, taking care of healthcare expenses, or using it to fund your retirement plans. And there’s no cost to see if you qualify,” Freedman said.

If this option sounds promising to you, read on. In this quick guide, we’ll explain this transaction, what you need to know, and we’ll also share a success story.

What is a Life Settlement?

A life settlement is the sale of a life insurance policy for its market value, which is usually four or more times greater than the policy’s cash surrender value. And the value of selling a policy is infinitely greater than allowing a policy to lapse, which results in the policyowner receiving nothing from the insurance company.

In a life settlement, the policyowner usually receives a lump sum of money to use as they see fit. Sometimes a life settlement allows the policyowner to retain a portion of the death benefits for their loved ones, with no need to pay premiums in the future.

People who qualify for life settlements are usually 65 or older, and have a policy with a face value of $100,000 or more. At Lighthouse Life, we purchase policies from seniors who have had a change in their health since they purchased the policy, as well as those who are still relatively healthy.

How a Life Settlement Works

An important part of a life settlement is finding the right company to work with.

Life settlement companies, including purchasers and brokers of policies, must be properly licensed by state insurance departments and follow all applicable regulations. Lighthouse Life not only adheres to these requirements, we exceed those standards by requiring additional disclosure of fees and other transactional requirements. We help you make the best decision for you and your family, even if it means you decide selling a policy isn’t the right option for you right now.

Once you find a company you feel comfortable working with, you’ll need to see if you qualify for a life settlement. You can do this by filling out a short online form and speaking with a specialist who will further qualify you by obtaining additional policy and health-related information. Once these steps are complete, you’ll receive a policy appraisal and, in most cases, an offer to purchase the policy.

Lighthouse Life usually makes offers within five days. Once you accept an offer, the life settlement company will help you complete the life settlement, including walking through all the required forms and approvals. Policyowners working with Lighthouse Life typically receive funds in around 45 days when we collect all the necessary information.

Things to Consider before Selling Your Policy

We recommend working with a company that does more than the bare minimum. While life settlement companies are required to provide certain information throughout the life settlement process, be sure to ask about fees and commissions that are being paid to settlement brokers and others.  Also, find out what steps the company takes to protect your personal information. And, you should always be told if there are alternatives to selling your life insurance policy. Lighthouse Life exceeds statutory disclosure requirements to help you make an informed decision about a life settlement.

With the right company by your side, a life settlement can be a fast, simple process.

A Successful Life Settlement Story

Nick S., a 70-year-old retiree, decided to take a second look at his guaranteed universal life (GUL) policy. With his children grown, he no longer needed the insurance policy, and didn’t want to keep making the expensive premium payments that came with it. What he did want was a way to supplement his retirement savings.

Nick was in good health and his policy had a face amount of $110,000.

After learning he can sell his life insurance policy, Nick contacted Lighthouse Life. He completed a brief medical interview and Lighthouse Life helped obtain additional information about his policy from his insurance company. After only a few days Nick received and accepted our offer to buy his policy for $14,000.

Your Life Settlement is Waiting

There are many reasons you might not want or need your life insurance anymore. At Lighthouse Life, we can help you decide if selling your policy is the right option for you. To get started, simply call us or complete our online form today.

*The name of the case study has been changed to protect private information.

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