How Life Insurance Settlements Works

How Life Insurance Settlements Works
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Dec 1, 2023

Finding the Cash Value of Your Life Insurance Policy

In 1911, a sick patient named John Burchard was having trouble paying his hospital bills. He was terminally ill and had but a few more months to live. Fortunately, he had a life insurance policy that he wished to cash in. The patient asked his doctor, who was taking care of him at the time, if he could purchase his life insurance policy before death, and receive the benefits after he had died.

Life Settlements Are Cash For Life Insurance Policies

Similar to selling a home, a person with a life insurance policy can take advantage of their asset and be financially rewarded before the maturity date. Viatical settlements and whole life insurance settlements that provide cash settlements for life insurance policyholders are considered the same as transactions for private property.

The 1911 case made it available for a policyholder to transfer their life settlement to a Life Settlement Company in order to benefit from the proceeds while alive. In the 1980s the viatical settlements market emerged. Brokers would purchase the life insurance of AIDS patients who didn’t have long to live, and wanted immediate liquidity. The patients would get a better quality of life due to their increased finances as the brokers liberated them from having to pay premiums.

In exchange, the brokers and policy buyers received the face value of the policy. Now, these terminally ill patients that need financial assistance are using viatical life settlements for the same reason.

Make Use Of Your No Longer Wanted Life Insurance Policy

Many people do not know the benefits that a life settlement organization like Life Insurance Settlements Inc. can offer. In fact, most seniors don’t know that they have this option but there and there are many reasons for selling your life insurance policy. Life insurance settlements can be a valuable source of liquidity for people who would otherwise surrender their policies or allow them to lapse.

When you surrender your policy to your insurance company you will only get back your policy’s cash surrender value: pennies on the dollar. Similarly, when you allow your life insurance policy to lapse you are telling your life insurance company that you cannot pay your monthly dues anymore. The policy freezes (you are not covered) and your survivors will not be able to receive the death benefits after your passing.

The benefit of a life settlement is that you receive a lump sum cash payment GREATER than the surrender value your insurance company can pay you. The amount you receive depends on three factors: your age, health, and the terms/conditions of your policy.

A life settlement can make sense for you if you no longer want or need your current policy, or if you can no longer afford the expense of paying insurance premiums.

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Amelie Griffith
Content Writer at Purex
How Life Insurance Settlements Works

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