Life Settlements for Terminal Illness
When faced with a serious medical condition, many people explore life settlements for terminal illness as a way to access immediate cash from their life insurance policy. While viatical settlements are available for those with a life expectancy of two years or less, life settlements are typically an option for individuals with longer life expectancies—more than two years. This financial option can help cover medical treatments, caregiving costs, or other expenses without waiting for the death benefit to be paid out.
For those who no longer need their policy or are struggling with premium payments, a life settlement can provide much-needed financial flexibility during a difficult time.
What Are Life Settlements for Terminal Illness?
A life settlement involves selling an existing life insurance policy to a third-party investor for a lump sum that is greater than the policy’s cash surrender value but less than its full death benefit. The buyer takes over premium payments and eventually receives the death benefit when the insured passes away.
Unlike letting a policy lapse or surrendering it to the insurance company for a small payout, a life settlement allows policyholders to get more value from their policy while they are still alive. The funds received can be used for anything, from covering medical expenses and long-term care to paying off debt or simply improving quality of life.
Who Qualifies for a Life Settlement?
While viatical settlements are specifically for individuals with a life expectancy of two years or less, life settlements for terminal illness may be an option for those who:
- Have been diagnosed with a serious medical condition but have a life expectancy of more than two years. (Shorter life expectancies may qualify for a viatical settlement.)
- Own a whole life, universal life, or convertible term life policy with a face value of at least $100,000.
- No longer need or can no longer afford their policy.
- Prefer to receive a lump sum payout now.
Common Conditions That May Qualify
While life settlements are often associated with aging individuals, policyholders with serious health conditions may also qualify. Some illnesses that may qualify include:
- Stage 3 or 4 cancer
- Congestive heart failure (CHF)
- Chronic obstructive pulmonary disease (COPD)
- End-stage renal disease (ESRD)
- Liver disease
- Multiple sclerosis (MS)
- Parkinson’s disease
- Advanced Alzheimer’s or other forms of dementia
Each case is reviewed individually, and the key factor is life expectancy. Policyholders with progressive illnesses that significantly impact longevity but do not qualify for a viatical settlement may still be eligible for a life settlement.
How Much Can You Get for a Life Settlement?
The amount policyholders receive from a life settlement varies depending on several factors:
- Life expectancy – Shorter life expectancies typically result in higher offers.
- Policy type and size – Universal and whole life policies generally receive higher offers than term policies.
- Premium costs – Lower premiums make a policy more valuable to buyers.
- Market conditions – Investor demand influences settlement amounts.
While offers can range widely, policyholders typically receive 10% to 60% of the policy’s face value. For example, a $500,000 policy could result in a payout between $50,000 and $300,000, depending on eligibility factors.
How Are the Funds Used?
One of the main advantages of a life settlement is flexibility. Unlike some financial assistance programs that restrict how money is spent, life settlement proceeds can be used however the seller chooses. Common uses include:
- Medical expenses – Covering treatments, medications, or complementary and alternative therapies.
- Long-term care – Paying for assisted living, in-home care, or nursing services.
- Debt repayment – Reducing financial burdens by paying off outstanding loans or credit card debt.
- Everyday living expenses – Maintaining financial stability for household bills and necessities.
- Enjoying life – Taking a trip, visiting family, or making meaningful memories.
Benefits of Selling a Life Insurance Policy
✔ Immediate access to cash.
✔ No restrictions on how funds are used.
✔ Eliminates the need to pay future premiums.
✔ Potentially higher payout than surrendering the policy.
Is a Life Settlement Right for You?
If you have a serious illness but do not qualify for a viatical settlement, life settlements for terminal illness may still be an option. Selling your policy can provide financial relief, eliminate costly premium payments, and allow you to use the funds in a way that benefits you the most. To learn if you’re likely to qualify for a life settlement or a viatical settlement, please give us a call at 800-727-7654.
