In the world of personal finance and insurance planning, opportunities often go unnoticed simply because people aren’t aware of them. One of the most overlooked tools for seniors and their advisors is the life settlement—a financial strategy that can unlock hidden value from a life insurance policy that is no longer wanted, needed, or affordable.
In this blog post, we’ll walk through a real-life case study that illustrates how a seemingly “worthless” term life insurance policy ended up generating over $100,000 for its owner. This situation not only provided a financial windfall to the policyholder, but it also highlights the critical importance of knowing when a life settlement is possible, especially in the case of term policies.
Background: A Policy Born from Divorce
The insured in this case was a 67-year-old male who owned a $1 million term life insurance policy. This wasn’t a policy he bought for retirement planning, estate tax coverage, or to provide for his children. In fact, the origins of the policy were somewhat unusual—he had been required to purchase it ten years earlier as part of a divorce settlement.
At the time of the divorce, the court mandated that he carry the policy for the benefit of his former spouse. But now, a decade later, that requirement had expired. He was free to cancel the policy and move on. Given that the term policy did not accumulate cash value and the premiums were no longer a worthwhile expense, he was prepared to simply let it lapse.
What he didn’t realize was that there was an alternative.
A Trusted Advisor Steps In
Before allowing the policy to lapse, the policyholder discussed his intentions with his financial advisor. Fortunately, the advisor was knowledgeable about life settlements and suggested they at least explore whether the policy might have some market value.
The advisor reached out to our team at SFS Life Settlements to review the situation.
The Key Detail: Conversion Privilege Still Intact
Upon reviewing the policy, one of the first things we checked was whether the term policy still had a conversion privilege—and it did.
This was a game-changer.
A conversion privilege is a feature that allows a term policyholder to convert their term policy into a permanent cash value policy (usually universal life) without needing to undergo additional medical underwriting. Not all term policies have this feature, and even when they do, it typically expires after a set number of years or by a certain age.
In this case, the conversion privilege was still intact. That meant the policy could be converted into a form that investors in the life settlement market would consider.
Why does this matter?
Because term policies, by themselves, typically have no cash value. They are designed to provide coverage for a specific time and expire worthless if the insured outlives the term. However, once a term policy is converted into a permanent policy, it becomes a real asset—one that can be bought, sold, and valued based on the insured’s age and health profile.
Due Diligence: Medical Records and Market Analysis
With the conversion privilege confirmed, our team moved into the next phase of the process. We collected the necessary documentation, including the insured’s medical records and policy details, to build a comprehensive life settlement case file.
The insured was 67 years old and had some age-related health issues that made him a viable candidate for a life settlement. As a general rule, policies owned by individuals age 65 and older with changes in health since the policy was issued tend to attract more interest in the secondary market.
Once we had the full package together, we submitted the converted policy to our nationwide network of over 40 funders and institutional buyers.
Creating Competition Among Buyers
One of the most important things we do at SFS Life Settlements is create competition among buyers. It’s not enough to simply get one offer and call it a day. The life settlement market is dynamic, and pricing can vary widely depending on how the case is presented and how much competition exists among buyers.
We spent two weeks marketing the policy, generating interest, and encouraging competitive bidding.
The result?
An offer of $105,000 for the insured’s converted life insurance policy.
The Outcome: A Surprising Financial Win
When we presented the offer to the client, he was floored. This was a policy he had planned to abandon—one he believed held no remaining value. Instead, he was now looking at a check for over $100,000.
He no longer had to pay premiums on the policy. In fact, the lump sum he received from the life settlement more than reimbursed him for all the premiums he had paid over the previous 10 years.
It was, in his words, “found money”—a welcome financial windfall at a time in life when cash flow and liquidity are increasingly important.
The Bigger Picture: Lessons for Advisors and Policyholders
This case highlights several key lessons that can benefit both financial professionals and their clients:
1. Always Review Before You Lapse
Too often, seniors and their advisors allow life insurance policies to lapse without exploring alternatives. The Life Insurance Settlement Association (LISA) estimates that over $100 billion in face value is lapsed by seniors each year—most of it without ever being evaluated for a life settlement.
Even if a policy seems like it has no value, it’s worth asking the question: Could this be sold instead?
2. Term Policies Are Not Always Worthless
Most people (and even many advisors) assume that term policies are throwaway coverage with no resale value. While it’s true that most term policies don’t qualify for life settlements, the exception lies in those with active conversion privileges.
Knowing when the conversion option expires—and taking action before that date—can mean the difference between walking away with nothing and walking away with a six-figure check.
3. Work With Experts Who Know the Market
The life settlement market is not like selling a car or a house where you have Zillow or Kelley Blue Book to guide you. There’s no central exchange, and pricing can vary widely. That’s why it’s so important to work with a firm that has deep experience, strong relationships with funders, and a commitment to advocating for the client’s best interests.
At SFS, we don’t just look for any offer—we aim to create competition and secure the best offer.
4. Life Settlements Are About Financial Empowerment
In this case, the client received over $100,000 that he can now use however he sees fit. That could mean paying off debt, investing in a grandchild’s education, boosting retirement savings, or simply enjoying life with more peace of mind.
It’s not just about the money. It’s about the freedom and flexibility that money brings.
A Final Word for Advisors
If you’re a financial advisor, estate planner, life insurance agent, or eldercare professional, stories like this should be a reminder of the value you can bring to your clients by simply asking the right questions.
- Does your client own a term policy that’s no longer needed?
- Has the conversion privilege expired?
- Have there been changes in the client’s health?
- Are they burdened by premium payments they no longer want to make?
If the answer to any of these questions is yes, a life settlement might be worth exploring.
Our team at SFS Life Settlements is here to help evaluate these cases with no upfront cost or obligation. We work with you to assess whether a life settlement is appropriate, guide you and your client through the process, and present the policy to our extensive network of buyers to ensure your client gets the best possible outcome.
Want to Learn More?
Whether you’re a senior looking to cash in an unwanted policy or a financial professional seeking better outcomes for your clients, we’re here to help.
📞 Contact us today for a free, no-obligation policy review.
You might be surprised by what your life insurance policy is worth.