Why Some Life Insurance Policies Work for Life Settlements and Others Don't

Green Settlements Staff

Table of Contents:

  1. Your Age and Health Status Play a Key Role
  2. Size Matters
  3. When Conversion Deadlines Come Into Play
  4. When Premium Payments Get Too Expensive

For seniors who no longer want or need their life insurance policy, a life settlement can be an enticing alternative to letting the policy lapse or surrendering it back to the insurance carrier. However, not all policies are created equal—various factors, including a policy’s size, cost and type, determine its overall value.

Before making the decision to sell your life insurance policy, it’s important to understand why some policies make for better settlements than others.

Your Age and Health Status Play a Key Role

Although you can start exploring life settlement options while you’re still in your 60s, policyholders who wait until they’ve reached their 70s often receive higher offers for their policy. The status of your health is another major item prospective buyers will consider as they evaluate your eligibility.

A common misconception about life settlements is that they are only for the terminally ill, but this is not true. Every policyholder’s situation is unique, and being in relatively good health won’t automatically preclude you from selling your policy. It is worth noting, however, that a 75-year-old who has experienced a change or decline in their health since purchasing their life insurance policy will ultimately make for a more attractive life settlement candidate than a 65-year-old in somewhat decent health.

To help buyers assess the value of your policy, you may be asked to submit your medical records or complete a medical questionnaire.

Size Matters

The life settlement industry does not discriminate based on policy type, meaning that term, universal life and whole life policies can qualify. Policy size, on the other hand, is where prospective purchasers become more discerning. Generally speaking, there are no limits on the size of policy, but minimums start at $100,000.

When Conversion Deadlines Come Into Play

Many term life insurance policies come with a conversion option, allowing you to transform your policy from one that is limited in duration to a permanent life policy. When it comes to term policies, they often must be convertible in order to qualify for a life settlement. However, you can’t simply convert your policy whenever you wish—you must do so by a certain date, known as your policy’s conversion deadline.

If you are a term policyholder and you plan to sell, your best bet is to begin the process approximately six months ahead of the deadline to allow enough time to complete the settlement. Different buyers will have different protocols for term policies, so be sure to give yourself adequate time to navigate the process.

When Premium Payments Get Too Expensive

When it comes to life insurance, premium payments can be a real challenge for many policyholders. Faced with the prospect of paying exceedingly high premiums month after month, savvy seniors are finding that life settlements offer much-needed financial relief when they need it most.

Whether your premiums have become too difficult to pay each month, or you need money for an upcoming medical procedure or other large expense, your policy could be an ideal fit for a life settlement.

Because your policy’s value relies so heavily on individual factors such as your age, lifestyle and health status, buyers will require a few pieces of basic policy and medical information to begin calculating what your policy is ultimately worth.

To gain insight into your policy and unlock its true potential, get a no-obligation quote today—and reap the rewards for years to come.

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