Life Settlement

AAA

DEFINITION of 'Life Settlement'

The selling of one's life insurance policy to a third party for a one time cash payment. The purchaser then becomes the beneficiary of the policy and begins paying the premiums. Typically the purchaser is an experienced institutional investor, and policies will have face amounts in excess of $250,000.

A life settlement is similar to a "viatical settlement".

INVESTOPEDIA EXPLAINS 'Life Settlement'

Life settlements are usually only done when the insured person doesn't have a known life-threatening illness. They are often done with "key individual" insurance policies held by companies on executives who no longer work there; the company has a chance to cash out on a policy that was previously illiquid.

Sometimes people outgrow their need for a specific life insurance policy, and a life settlement may offer the chance to gain more than the policy's cash surrender value.

RELATED TERMS
  1. European Life Settlement Association ...

    An organization created to promote fair standards for the life ...
  2. Estate Planning

    The collection of preparation tasks that serve to manage an individual's ...
  3. Beneficiary

    Anybody who gains an advantage and/or profits from something. ...
  4. Institutional Investor

    A non-bank person or organization that trades securities in large ...
  5. Trustee

    A person or firm that holds or administers property or assets ...
  6. Universal Life Insurance

    A type of flexible permanent life insurance offering the low-cost ...
Related Articles
  1. Options & Futures

    Cashing In Your Life Insurance Policy

    Tough times call for desperate measures, but is raiding your life insurance policy even worth considering?
  2. Options & Futures

    Getting Started On Your Estate Plan

    With some preparation, you can save your heirs from paying a hefty estate tax. Here are some tips.
  3. Home & Auto

    Life Insurance Clauses Determine Your Coverage

    Understanding these key parts of your policy will help you to ensure that your family will be covered.
  4. Options & Futures

    Your Will: Why You Need A Power Of Attorney And Beneficiaries

    What would happen if you were suddenly unable to manage your financial affairs? Preparation is the best protection.
  5. Insurance

    What are some examples of when insurance bundling is a bad idea?

    Learn about situations where insurance bundling may not be a favorable option. Bundling insurance is often a good idea, but there are times when it isn't.
  6. Insurance

    Who are the best-rated life insurance companies in the US?

    Learn about what makes an insurance company the best. Read about the best life insurance companies in the U.S. in 2014, following ratings by Weis.
  7. Insurance

    What are some examples of unexpected exclusions in a home insurance policy?

    Learn about commonly excluded perils with different standard insurance policies. Explore events that homeowners should consider when purchasing insurance.
  8. Compared to other options, does it ever make sense to include cash-value life insurance in your investment portfolio?
    Trading Strategies

    How Good An Investment Is Life Insurance?

    Compared to other options, does it ever make sense to include cash-value life insurance in your investment portfolio? A look at the pros and cons.
  9. Here's how to incorporate life insurance into a plan to ensure that you and your family have the smoothest possible transition into retirement.
    Retirement

    The Smart Way To Use Life Insurance For Retirement

    Here's how to incorporate life insurance into a plan to ensure that you and your family have the smoothest possible transition into retirement.
  10. Insurance

    What are the tax implications of a life insurance policy loan?

    Learn the instances in which you are required to pay taxes on a life insurance policy loan, so you can avoid making a costly mistake.

You May Also Like

Hot Definitions
  1. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  2. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  3. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  4. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  5. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
  6. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
Trading Center