Life Settlement

A life settlement refers to the sale of a life insurance policy by the policyholder to a third party. Life settlements are a way that policyholders can access capital that would otherwise not be accessible. Say, for example, a retired person in their 70's has a life insurance policy with a $300,000 face value. There is a market made up of individuals and institutions that would be willing to purchase this policy for a portion of the face value. If the policy is sold, the policyholder would receive a lump sum payment that they would otherwise only have received upon their death. The new owner of the policy assumes ownership of the policy and responsibility for the premium payments. This new owner will then receive the $300,000 when the previous policyholder dies.