What Is a Life Settlement?
A life settlement is the legal sale of an existing life insurance policy by the policyholder to a third-party buyer, known as a life settlement provider or funder. In exchange, the policyholder receives a lump sum cash payment that exceeds the policy’s surrender value — but is less than the death benefit.
Once the sale is completed, the buyer assumes responsibility for future premium payments and becomes the policy’s new beneficiary.
✅ The result: The seller receives cash today. The buyer collects the death benefit later.
Life settlements have been regulated in most U.S. states since the early 2000s, and the market has evolved to include institutional investors, private equity funds, and specialized buyers who view life insurance as a stable, long-term asset class.
Why Consider a Life Settlement?
Most life insurance policies were purchased for protection. But over time, circumstances change. Here are common scenarios where a life settlement may make sense:
- The insured no longer needs the coverage (e.g., beneficiaries are now financially independent)
- The premiums are no longer affordable, especially with aging policies
- The policy is about to lapse or be surrendered for a minimal cash value
- The client would benefit more from immediate liquidity than a future payout
- The client has too much coverage for their current estate planning needs
- A term policy is approaching its conversion deadline
Instead of walking away from a policy, a life settlement may offer tens — or even hundreds — of thousands of dollars in immediate value.
Who Qualifies for a Life Settlement?
While each buyer uses different criteria, the general guidelines for a qualifying life settlement case include:
- Age: Most clients are 65+ years old. However, younger clients with serious health conditions may also qualify.
- Policy Face Value: Policies should be $100,000 or more to justify buyer interest.
- Health: The insured’s life expectancy plays a key role. Shorter life expectancies (typically under 15 years) tend to result in higher offers.
- Policy Type: Convertible Term, Universal Life (UL), Guaranteed Universal Life (GUL), Indexed UL (IUL), Whole Life, and even Variable Life can all potentially qualify.
Policy Types That Work
Some policy types are more attractive than others in the life settlement market:
- Guaranteed Universal Life (GUL):
Particularly valuable, especially in non-medical underwriting scenarios. These policies often have level premiums to age 105+ and are easy to model. - Universal Life (UL):
Attractive if the premiums are manageable and the cash value is modest. Buyers examine how long the policy can remain in force. - Indexed UL (IUL):
Growing in popularity; offers policy growth tied to index performance. Requires evaluation of carrier assumptions. - Whole Life:
Traditional policies with guaranteed premiums and values can work well, especially older blocks. - Convertible Term Policies:
These can be strong candidates — especially if conversion deadlines are approaching. Once converted to a permanent policy, they can often be sold. - Variable Life:
Less common but viable in certain cases, particularly when market conditions favor performance and the policy is seasoned.
Medical vs. Non-Medical Underwriting Options
Traditional underwriting requires a full review of medical records. The policyholder signs a HIPAA authorization, and SFS Life Settlements coordinates the record retrieval and life expectancy analysis.
However, a growing number of buyers now offer non-medical underwriting options — primarily for GUL policies. In these cases, buyers may make an offer based only on:
- Date of birth
- Carrier illustration (to age 105 or beyond)
- Basic policy details
This new model dramatically speeds up the process and opens the door for healthy seniors who previously wouldn’t qualify.
Common Misconceptions
Many clients — and even financial professionals — are unfamiliar with the life settlement market. Here are some common myths we regularly encounter:
❌ “I have to be terminally ill to qualify.”
✅ False. Many healthy seniors can qualify, especially with GUL policies.
❌ “My policy has no cash value, so it’s worthless.”
✅ Also false. A policy’s market value can exceed its surrender value — even if it’s zero.
❌ “Only wealthy clients qualify.”
✅ Not true. While many high-net-worth individuals benefit, middle-income seniors also find life settlements valuable.
The Process: What to Expect
At SFS Life Settlements, we make the process simple for both clients and their advisors. Here’s how it works:
- Initial Assessment:
We collect basic policy info, the insured’s age, and any health conditions (if medical underwriting is required). - Authorization & Records:
The client signs an authorization form to release records and policy illustrations. - Underwriting & Valuation:
For medical cases, life expectancy reports are ordered. For GULs, we may skip this step. - Market Submission:
We present the case to over 40 licensed buyers and funders to maximize competitive bidding. - Offer Review:
We bring the top offers to you and the client to discuss. - Closing & Payment:
Once a buyer is selected, we facilitate the entire closing process. Payment is made directly to the policyholder.
Real-World Example: A Family Win
We recently worked with a family whose 88-year-old father had a $1.5M policy. Premiums were approaching $150,000 annually — becoming unmanageable.
Rather than surrender the policy or let it lapse, they chose the Retained Death Benefit (RDB) option:
- They received a partial cash payout now
- They retained a portion of the death benefit for the family
- No more premium payments required
This hybrid option gave the family flexibility, financial relief, and peace of mind.
Why Advisors, Brokers, and Planners Should Pay Attention
If you’re a:
- Life insurance broker
- Financial advisor
- Estate planner
- Wealth manager
- Medicare or reverse mortgage specialist
…then understanding life settlements is now part of your fiduciary responsibility. Ignoring the option could result in your client surrendering or lapsing a policy that has real market value.
Advisors who introduce life settlement opportunities can:
- Differentiate their services
- Solve real problems for aging clients
- Unlock new revenue streams via referral arrangements
Getting Started: How SFS Can Help
SFS Life Settlements has been working in this space since 2006. We’ve built a national reputation for integrity, transparency, and real results.
We do the heavy lifting — from policy analysis and market submission to negotiating top offers and handling the paperwork. Whether you’re looking to refer a client or white-label life settlement services under your brand, we can help.
Let’s connect!
If you’re an advisor or broker and you’d like to:
✅ Explore whether a client’s policy qualifies
✅ Understand today’s market value for a specific case
✅ Learn how to add life settlements to your client offering
👉 Contact us for a no-cost policy review.
Don’t let your clients lapse a valuable asset. Let’s uncover what their policy might really be worth.