Who Qualifies for a Life Settlement?

As the life settlement market increases in visibility, more and more seniors are learning that a settlement can be a profitable way to get a cash benefit from a life insurance policy. The key to making a decision concerning life insurance options, however, is understanding who is eligible for a life settlement and who is not. While a financial advisor or insurance agent can provide guidance, individuals interested in a life settlement can determine their own eligibility with accurate information.

Consider the following parameters to determine if a life settlement might be a good choice for you, and then enter your specific details into our life settlement calculator for a specific estimate of the payout you could receive.

So, Who Qualifies for a Life Settlement?

Age

In the majority of cases, an individual must be over 65 to qualify for a life settlement, although younger people might enter into settlements if they have certain medical conditions.

Health Status

Because life settlements are the most lucrative for individuals whose health is more impaired than predicted at the time the policy was issued, those who are less healthy are more likely to benefit from a settlement.

Type of Insurance

Universal Life, Survivorship Universal Life, Convertible Term Life, and Whole Life policies can all qualify for life settlements if the policy holder meets other conditions.

Death Benefit

If the death benefit, or face amount, of a policy exceeds $100,000, that policy can be sold in a life settlement.

Policy Premiums

Illustrated premiums should be less than five percent of the policy’s face amount.

Date of Issue

A policy must have been active for more than 25 months to be eligible for a life settlement, but some states require that a policy be in force for up to five years. For more about the regulation of life settlements in various states, consult the Life Insurance Settlement Association resource here.

Type of Ownership

Policies owned by virtually any type of entity can be sold in a settlement—individual, corporate, foundation, business, trust or non-profit organization.

Carrier

For a policy to qualify for a life settlement, it must have been issued by a U.S.-based carrier with an A.M. Best Rating of B++ or better.