What Is A Life Settlement?

Origin of a Life Settlement

In 1911, the U.S. Supreme Court ruled in Grigsby v. Russell that a life insurance policy is an asset that can accumulate in value and be bought or sold to whomever the seller desires.

Definition of a Life Settlement

A life settlement is an agreement between a policyholder and a financial institution. In this agreement, the policyholder sells the policy ownership rights to the financial institution for a cash payment. That payment will always be more than the cash surrender value of the policy, thus providing the policyholder with immediate liquidity for the unrealized equity in the life insurance policy.

Life settlements are designed for individuals who are 65 years or older. They may or may not have health related issues. Alternatively, viatical settlements are designed for individuals of any age who have a life threatening or chronic condition that limits their quality and length of life.