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Life Settlements for Terminal Illness

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Life Settlements for Terminal Illness infographic explaining eligibility, common qualifying conditions, benefits, and how to get started

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.

Life Settlement Eligibility Do You Qualify?

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Life settlement eligibility Do You Qualify This chart shows factors that determine whether or not you may qualify for a life settlement or viatical settlement.

When considering a life settlement, one of the most important questions is, “Do you qualify to sell your policy?” Understanding life settlement eligibility do you qualify? is key to determining whether you can turn your life insurance policy into a cash payout. In this post, we’ll explore the factors that determine life settlement eligibility and help you assess if selling your policy is an option for you.  

What Is a Life Settlement?

Before learning about eligibility, it’s important to understand what a life settlement is. A life settlement involves selling your existing life insurance policy to a third party for more than its cash surrender value, but less than its death benefit. The buyer takes over ownership and beneficiary rights to the policy, continues paying the premiums, and ultimately collects the death benefit when the insured passes away.

Many people choose a life settlement when they no longer need their life insurance or if the premiums have become too expensive. The funds from selling a policy can be used for a variety of financial needs including medical bills, retirement expenses, or even a more affordable insurance plan.

Age and Health: Two Key Factors

The first major factor in determining your eligibility for a life settlement is your age and health status. Typically, seniors that qualify for a life settlement are 65 or older, but this can vary based on health condition.

  1. Age Requirements:
    • The general benchmark for qualifying is being at least 65 years old, but insureds who are younger may qualify if they have a chronic or terminal health condition.  It is always best to give us a call to discuss your unique case.  
  2. Health Condition:
    • Health is a crucial aspect of life settlement eligibility. Buyers are more interested in policies from individuals with shorter life expectancies because they’ll receive the death benefit sooner. While you don’t need to be terminally ill, those with chronic or serious medical conditions are more likely to qualify.

Policy Size and Type Matter

The type and size of your life insurance policy can also impact your eligibility for a life settlement.

  1. Policy Size:
    • Most life settlement purchasers look for policies with a face value (death benefit) of $100,000 or more. While smaller policies can sometimes qualify, they may not be as attractive to investors.
  2. Policy Type:
    • Almost all types of life insurance policies can be sold in a life settlement. However, some policies are more appealing to buyers:
      • Universal Life: These policies are highly attractive because they offer flexibility in premium payments and potential cash value growth.
      • Term Life: Term policies can be eligible, but usually only if they can be converted into a permanent policy.  Some non-convertible term policies may qualify for a viatical settlement if the insured is dealing with a serious health concern.
      • Whole Life: Whole life policies often qualify due to their guaranteed coverage and built-in cash value.
      • Variable Life: While more complex, variable life policies can also qualify.

Premium Amounts and Cash Surrender Value

Another factor affecting a policy’s eligibility for a life settlement is the amount of premium payments.   Potential buyers will factor in costs to keep the policy in force over your expected lifetime when calculating an offer.  

In some cases, policies with a high cash surrender value can still qualify for a life settlement, but this is generally not ideal for a life settlement. If your policy has no or little cash value, it can be more likely to qualify.

How Long Have You Held the Policy?

Most life settlement companies require that policies have been in force for at least two years. This is due to contestability clauses. If your policy is relatively new, it may not yet be eligible for a life settlement.

Financial and Legal Considerations

While not a direct factor in determining eligibility, there are several financial and legal considerations that can impact your decision to sell your policy.

  1. Outstanding Loans on the Policy:
    • If you have taken out loans against your life insurance policy, this can reduce its overall value in a life settlement. Some buyers may still be interested, but they will deduct the loan balance from any offer they make.
  2. Legal Ownership:
    • You must be the legal owner of the policy in order to sell it. If the policy is part of a trust or another entity holds ownership, a principal, such as a trustee, must be available to sign initial paperwork and the contract should you proceed with a sale.  
  3. Beneficiary Concerns:
    • If you’re considering selling your policy, it’s important to consider the needs of your beneficiaries. Once the policy is sold, the buyer becomes the new beneficiary, and your heirs will no longer receive the death benefit. Discussing this decision with your family can help avoid misunderstandings later on.

Getting a Life Settlement Valuation

If you’re unsure whether your policy qualifies for a life settlement, the best first step is to contact us for a no obligation policy appraisal. After learning your age, policy type and premiums, and approximate health condition, we will be able to let you know if you are likely to be eligible for a life settlement or viatical settlement.  

A valuation can give you a better idea of what to expect, and whether it’s worth pursuing a life settlement based on your specific circumstances.

Should You Pursue a Life Settlement?

Deciding whether to sell your life insurance policy through a life settlement is a personal decision that depends on your financial situation, health, and future needs. While many seniors find life settlements to be a valuable source of extra income, it’s important to weigh the pros and cons carefully. If you no longer need your policy or can’t afford the premiums, selling it might be a smart financial move.

Life settlement eligibility depends on several factors, including your age, health, policy type, and size. While every situation is unique, understanding these core aspects can help you determine whether selling your policy is the right choice. If you think you might qualify, the next step is to consult a life settlement company for an initial evaluation.

Please give us a call at 800-727-7654 to learn if you are likely to qualify to sell your policy for cash.

Advisers Dealing with Underperforming Universal Life

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financial advisers dealing with underperforming universal life insurance policies now have a viable option for their clients - a life settlement can provide a way to access hidden value

We speak with many long term financial advisers dealing with underperforming universal life insurance. Most remember writing universal life policies in the mid-eighties at 9% or more interest and having no qualms showing an illustration to that effect.

Underperforming Universal Life Policies

Though years and years of low interest rates have bolstered the stock market and the real estate market, insurance policies have largely underperformed  the interest rates that were once illustrated comfortably.

What a lot of people don’t realize is that inside of a universal life insurance policy, the cost of insurance per 1000 increases exponentially as we age. The guaranteed cost of insurance rates on most universal life insurance policies do not guarantee that the policy will stay in force until age 100. There are many different approaches to this with respect to guaranteed provisions, target premiums, etc.. No two policies are exactly the same because no two people took them out at the exact same time, from the exact same company and paid the exact same amount during a low interest rate environment.

It’s very possible, in fact probable, that many policy owners who once saw their cash value going up, now see it plateauing or decreasing due to the rising cost of insurance. The scary part is that the less cash you have, the more insurance you have to pay for as the cost per 1000 increases dramatically.

financial advisors dealing with underperforming universal life insurance see policy values decreasing over time

Insurance companies rely heavily on life insurance policies lapsing. The best case scenario from an insurance company’s standpoint would be that you pay premiums for years and years and they never give you any money back and they never pay a death benefit.

Most policies lapse without ever paying a claim.  In fact, over 642 billion dollars in face value of life insurance policies lapsed last year. 

A Viable Solution – Life Settlements

Life insurance is no longer an all or nothing proposition. Reverse life insurance allows you to get the real hidden value of an underperforming universal life insurance policy in the form of cash today.  Reverse life insurance is actually the opposite of life insurance with respect to qualifying. With reverse life insurance, the worse your health and the older you are, the more your life insurance policy is likely to be worth in the secondary market.

The cash surrender value or enhanced cash surrender value offer that you see on your statements for universal life are essentially an offer from your insurance company for your life insurance policy. Your policy may have a hidden value and it is your property to sell in a life settlement versus lapse.

If you’re an adviser, revealing this possibility to your clients might allow you to once again hold your head high, in case they hung on to the illustrations that you generated 35 years ago.

Universal life insurance policies with zero cash value and ready to lapse are often prime candidates for a life settlement. If someone has had any slippage in health, there’s a chance to qualify for something if you are over age 55 or 60.

advisers dealing with underperforming universal life policies now have another sound option for their clients here is an example of a life settlement on zero cash value universal life policies

Financial advisers dealing with underperforming universal life insurance policies now have an option.  Not everyone and every policy qualify. Anyone over age 50 is crazy to lapse an underperforming universal life insurance policy without first having it appraised for hidden value.

The insured’s health is the main factor, but there are many factors to consider. Different guaranteed provisions, types of policies,  different carriers and their ratings all matter.  Each case must be considered on an individual basis. 

Insurance companies and financial advisers are being sued for not informing their clients of their ability to possibly get more for their underperforming universal life insurance policy.   Please do not allow someone to throw away a universal life insurance policy with no cash value without having it appraised. The hidden value can be life changing. 

Do You Qualify?