https://www.insurerbrain.com/w/index.php?action=history&feed=atom&title=Definition%3ALife_settlement 2026-06-13T15:40:20Z Revision history for this page on the wiki MediaWiki 1.43.8 https://www.insurerbrain.com/w/index.php?title=Definition:Life_settlement&diff=11261&oldid=prev 2026-03-11T23:53:12Z

<p>Bot: Creating new article from JSON</p> <p><b>New page</b></p><div>💰 &#039;&#039;&#039;Life settlement&#039;&#039;&#039; is a transaction in which the owner of an existing [[Definition:Life insurance | life insurance]] [[Definition:Insurance policy | policy]] sells that policy to a third-party investor for a lump sum that exceeds the policy&#039;s [[Definition:Cash surrender value | cash surrender value]] but is less than the [[Definition:Death benefit | death benefit]]. Within the insurance industry, life settlements have created a secondary market for life policies, giving [[Definition:Policyholder | policyholders]] — typically seniors who no longer need or can afford their coverage — a financial alternative to simply lapsing or surrendering a policy.<br /> <br /> ⚙️ The mechanics begin when a policy owner, often through a licensed [[Definition:Life settlement broker | life settlement broker]], submits the policy for evaluation by one or more [[Definition:Life settlement provider | life settlement providers]]. The provider assesses the insured&#039;s [[Definition:Life expectancy | life expectancy]], the policy&#039;s face amount, [[Definition:Premium | premium]] obligations, and the type of coverage to arrive at an offer price. Once the sale closes, the investor assumes ownership, continues paying premiums, and ultimately collects the death benefit when the insured passes away. The investor&#039;s return depends heavily on the accuracy of the life expectancy estimate — if the insured lives significantly longer than projected, the investor&#039;s carrying costs rise and returns diminish. Institutional investors, hedge funds, and specialized funds have become active participants in this market, sometimes securitizing pools of settled policies into tradeable instruments.<br /> <br /> 📜 Regulation of life settlements varies by state, with most jurisdictions requiring licensing of brokers and providers and imposing disclosure obligations designed to protect sellers. Several states mandate minimum holding periods before a policy can be settled, in part to combat [[Definition:Stranger-originated life insurance (STOLI) | stranger-originated life insurance]] schemes where policies are purchased from inception with the intent to sell. For the life insurance industry more broadly, the settlement market introduces complexity: high settlement activity can disrupt a carrier&#039;s [[Definition:Lapse rate | lapse rate]] assumptions, since policies that would otherwise have lapsed remain in force and eventually pay out claims. Despite these tensions, life settlements provide genuine economic value to policyholders who gain liquidity from an otherwise illiquid asset.<br /> <br /> &#039;&#039;&#039;Related concepts:&#039;&#039;&#039;<br /> {{Div col|colwidth=20em}}<br /> * [[Definition:Viatical settlement]]<br /> * [[Definition:Life expectancy]]<br /> * [[Definition:Cash surrender value]]<br /> * [[Definition:Stranger-originated life insurance (STOLI)]]<br /> * [[Definition:Secondary market]]<br /> * [[Definition:Death benefit]]<br /> {{Div col end}}</div>

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