Who Can Qualify for a Life Insurance Settlement?


life insurance settlement


In order to qualify to sell a life insurance policy in a life insurance settlement you must be the owner of the policy, not just the insured. Often they are one and the same, but they may not be. For example, a wife may own a life insurance policy on her husband. Obviously the insured must cooperate with the policy owner and agree or there will never be a settlement.

A life insurance settlement is the sale of a life insurance policy by its owner to investors. You can think of a life insurance policy as being just like any other asset you might own that can be sold such as stocks or real estate. As with stocks, bonds and real estate, some life insurance policies are attractive to life insurance settlement investors and some are not.

There are many different types of life insurance policies. Typically investors are only interested in universal life, whole life or convertible term policies and the policies can be on 1 life or 2 lives. There are more investors attracted to policies with large face values.


How Old Do You Have to be to Make a Life Insurance Settlement?


One of the most important variables in the valuation and attractiveness of a policy to an investor is the life expectancy of the insured. Typically investors will only buy policies with an insured Life expectancy of 15 - 18 years or less. In fact the majority of life insurance settlements have life expectancies of 7- 12 years.

The reason life insurance settlements are often called senior settlements is because the insureds are usually over 70 years old. Occasionally, seniors in their 60's can make a life insurance settlement that is viable but usually this is because they have a reduced life expectancy. It is very important to work with an experienced life insurance settlement company who will be able to accurately appraise the value of a Life Insurance policy.


Life Insurance Policies Must be at Least 2 Years Old for a Life Insurance Settlement


The investors who buy life insurance settlements are Wall Street institutions like Goldman, Sachs & Co and Merrill Lynch. Because of the 2 year contestability period (learn more here) institutional investors do not like to buy policies that are less than 2 years old.

There is no maximum or minimum size of policy that can be sold. Some investors prefer larger policies others purchase lots of smaller ones. Policies of $10 million or more are regularly sold to investors. The average size policy in a life insurance settlement has a death benefit of $2 million, however investors buy policies of all sizes.


About the author:

David Mickelson, ChFC, AEP is an expert in wealth strategies for seniors. He has helped hundreds of seniors with life insurance, life settlements, and all aspects of estate planning.





Not For Everyone

Life Insurance Settlements are a great tool for seniors but not everyone can or should do them. It's important to understand what makes a policy attractive to investors and the characteristics of a policy owner that make a Life Insurance Settlement possible.



Links:

Understand the Life Insurance Settlement Process.

Find out why "senior settlements" are such a good deal for seniors.