The cash surrender value — also known as the cash value — is the cash amount offered to the policyholder in exchange for part or all of their insurance policy’s value. In cash value life insurance policies, policyholders are provided with a death benefit and a savings component that accumulates with every premium payment. If the owner chooses to terminate their life insurance contract before the end of the term period, they are able to receive the accumulated savings, or cash value, rather than the death benefit. An owner can also borrow from their cash value in the form of a loan, but then has to pay back the money with interest to maintain the full death benefit.
Viatical settlements are financial solutions meant for terminally-ill candidates of any age with a life expectancy of less than five years. These policyholders would sell their life insurance policy in exchange for immediate cash, which is typically used to pay for medical expenses and last wishes.
Life settlements are meant for seniors, age 65 or older, who have a life expectancy of more than five years. The money disbursed from the settlement can be used for whatever the recipient chooses.
Life settlements are not subject to one type of life insurance. While there are some more lucrative than others, all types of insurance policies qualify. Be sure to consult with an insurance provider prior to pursuing a life settlement to discuss your options.
Professional life expectancy firms calculate your lifespan based on your age, gender, medical history and medical condition as well as other factors against a similar group of individuals. The firm then provides you with an average life expectancy, and it is formulated based on your specific situation.
Yes, you may have to pay taxes on your disbursement. However, there are some settlement transactions considered to be tax exempt. Be sure to discuss the details with a financial advisor or other professional.
No. You do have the option of selling a portion of your policy rather than the entire value. You can sell a portion of your policy, pay off your premium payments and still maintain a portion of your death benefit. Discuss your options with your financial advisor and insurance provider.
Life settlements can be complex transactions that include legal parameters. In order to maximize what you receive for the value of your policy, it is highly recommended you seek professional financial assistance from an advisor or broker. They can help you navigate the sale process, help you with paperwork and ensure the best sale price for your contract.
On average, a life settlement transaction takes a few months to fully complete due to the involvement of outside entities. Consult with your financial advisor on specific details concerning your life settlement application.
Once the policy is sold, all rights and ownership are transferred to the new owner or investor. They are then responsible for all future premium payments until the policy matures. At that point, the new owner will be able to receive the death benefit of the insurance contract.
Annuity.org writers adhere to strict sourcing guidelines and use only credible sources of information, including authoritative financial publications, academic organizations, peer-reviewed journals, highly regarded nonprofit organizations, government reports, court records and interviews with qualified experts. You can read more about our commitment to accuracy, fairness and transparency in our editorial guidelines.