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Life Settlement Misconceptions

By Kelly Ramirez

Most Americans are still unfamiliar with life settlements. For those that have heard of the practice of selling an existing life insurance policy, there are a number of common misconceptions about the relatively new transaction. These misunderstandings too often bias or prevent people from exploring the option that could potentially offer a great financial benefit.

The life settlement industry is an evolution of the viatical industry that sprung up in the 1980′s and 1990′s to buy policies of AIDS patients. Now the life settlement industry overwhelmingly serves healthy senior citizens. Insureds absolutely do not need to be in poor health or have a terminal illness to qualify for a life settlement.

When someone buys a new life insurance policy, quite often a medical exam is required. However, when selling an existing policy in a life settlement no medical exam or doctor visit is required. A life settlement broker will request the existing medical records from the insured’s physician and then forward to an independent actuary for review. Those reviews are used by potential buyers to formulate their purchase offers.

Many people assume that a life insurance policy must have extensive cash value in order to qualify for a life settlement. The opposite is actually true. While cash value in some policies can be used by buyers to pay future premiums, it also presents an obstacle for purchasers. A life settlement offer must exceed the cash value of a policy or the seller will not be sufficiently motivated to participate in a life settlement. Therefore, policies with too much cash value will be too expensive for potential purchasers.

While life settlements are still foreign to many Americans, the industry is growing in popularity and notoriety. Eliminating the confusion that exists in the marketplace will help seniors unlock the potential windfall many don’t realize they have in their own life insurance policies. The first step is to find a good life settlement broker to assist with the process and then evaluate the offers that are presented.

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Article Citation
MLA Style Citation:
Ramirez, Kelly "Life Settlement Misconceptions." Life Settlement Misconceptions. 1 Jul. 2010. 3 Aug 2014 <>.

APA Style Citation:
Ramirez, K (2010, July 1). Life Settlement Misconceptions. Retrieved August 3, 2014, from

Chicago Style Citation:
Ramirez, Kelly "Life Settlement Misconceptions"

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