Life Settlement

A life insurance settlement is the actual transaction in which a policy owner sells ownership and beneficiary rights of his or her policy to a third party life settlement company for a lump sum of money. The original policy owner and insured, if they are two separate people, must agree on the sale first.

The life insurance settlement-sometimes called a senior life settlement-is a written, contractual agreement in which a life settlement company is transferred all rights to a life insurance policy from an individual who does not have a life threatening illness or condition.

The company pays the owner or holder of the policy an amount less than its net death benefit. An original policy holder might consider a senior life settlement when he or she could get more money from the sale of a policy to a third party than her or she would by surrendering the policy to the insurance company.

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