A Life Settlement is the sale of an unwanted or inefficient life insurance policy to a financial institution or other funding source for an amount greater than the cash surrender value of that policy. The purchaser becomes the owner and beneficiary of the policy, and is responsible for all future premium payments. If a client finds his or her policy is underperforming or is no longer needed, he or she can use the proceeds of a life settlement to purchase another policy, or for any other purpose. The settlement often makes better use of the capital tied up in the insurance policy than alternatives such as surrendering, exchanging, or simply lapsing the policy. The value of a life insurance policy is determined by a number of factors, including, but not limited to, the medical condition and age of the insured, type of insurance policy, rating of the issuing insurance company and amount of premium payments to keep the life insurance policy in force. The typical life settlement candidate is a senior with a life expectancy of 15 years or less. He or she has a permanent or term (if convertible) life insurance policy.
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