Life Settlements Definition: Completely Defined for 2020
Here is a quick reference for you about the definition a Life Settlement so you have the most accurate, consolidated information.
The definition of a Life Settlement is both simple and complex. At the very core, it’s just “selling a life insurance policy to an investor” but people are often confused because they associate life settlements with viatical settlements that have different underwriting criteria. Simply put, life settlements are for seniors over 65 years old while viatical settlements are for critically ill clients of any age and both involve the sale of a life insurance policy. Herein lies the issue. Since the industry is becoming more recognized, still many (including lawmakers) wrestle with “the true definition”. In fact, the only dictionary that defines a life settlement (that we could find) was Merriam-Webster dictionary (see definition below). The above graphic is our simplified definition but it varies from state legislators to the Life Insurance Settlement Association definition (LISA). Here are some more resources to help you determine what a life settlement is according to outside sources.
Life Settlement Defined by LISA
“A life settlement is the sale of a life insurance policy to a third party for a value in excess of the policy’s cash surrender value, but less than its face value, or death benefit. A policy owner receives a cash payment, while the purchaser of the policy assumes all future premium payments and receives the death benefit upon the death of the insured.” – Source
Life Settlement Defined by Merriam-Webster
“Legal Definition of life settlement: an agreement by which the owner of a life insurance policy covering a person (as the owner) who is usually a senior citizen receives compensation for less than the expected death benefit in return for the sale, assignment, transfer, devise, or bequest of the death benefit or policy ownership to another party (as a company specializing in such transactions)” – Source
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