What Does Life Settlement Mean?

There is a useful option for life insurance contracts called life settlement which gives the insured the chance to sell his or her policy to a third person, usually to a professional investor. Be it because of the urgent need of liquidity, or because outgrowing the policy, people very often sell their life insurances and get a large sum of cash instead.

The person who purchases such a policy will become the beneficiary and will be responsible for paying the insurance premiums. But before transforming the policy’s insured person, the insurer obviously needs to re-evaluate the new situation.

Life Settlement Explained

There are situations when a life settlement ensures a better income than the cash surrender value of the contract. The most usual case is settling a ‘key individual insurance contract’ made on an executive by a company. If the person no longer works for that company, getting a lump sum of money instead of that policy seems to be a good option.

Life settlements do not differ a lot from the so-called ‘viatical settlements’. Both are chosen only if the insured doesn't have any serious illnesses which would threaten their lives.