Life Insurance Settelments

Life insurance settelments are known as the 'secondary market' for life insurance policies. This basically means that there is a market of investors who trade in or purchase your life insurance policy.

There are three basic variations on this theme: life insurance settlements, viaticals, and accelerated death benefits. The first two are closely related, accelerated death benefits are an alternative to life settelments offered by many insurance companies.

Life Settlements definition: A life insurance settlements is where an owner of a life insurance policy sells or transfers all of their rights to an insurance policy to a third party. In exchange, the policy owner will receive some percentage of the face amount of the policy. The life settlements company then pays any future premiums on the policy until the insured's death at which point they will receive the death benefit (and recoup their investment).Life settlelments are sometimes referred to as senior life settlements.

Viaticals definition: Viaticals are a subset of life settelments. While they operate the same way, they are called viaticals if the insured has an expected mortality of under two years.

Accelerated Death Benefits: This is the life insurance companies' alternative to life settelments. Rather than selling an insurance policy to a third party, some insurers will provide an advance on the death benefit of an insurance policy. While some companies will offer this as part of the insurance policy, others offer it on an ad hoc basis (policy owners would contact the insurer and be considered on a case by case basis). Typically accelerated death benefits provide a portion of the death benefit to someone with a limited mortality expectation. With this benefit the policyowner does not lose any control over their insurance policy. Instead a portion of the death benefits are paid prior to the death of the insured, with the balance being paid to the beneficiaries upon the insured's death.