In some circumstances, a life-insured person may no longer want or need their life insurance policy due to illness, finances, or a variety of other reasons. Rather than allowing their policy to lapse and bypass the benefits, the insured can sell their life insurance policy to a third party in exchange for a one-time cash payment. The moment it becomes the property of the third party, it goes from being a life insurance policy to a life settlement.

Using purpose-built policy analysis software, AAA offers portfolio managers an advantage in determining where to allocate capital. Our quantitative longevity risk analysis program collects both publicly available data and data from the life settlement industry to provide a comprehensive overview of the investment opportunities as a whole. This quantitative approach quickly and effectively allows us to turn raw data into information that our team can then use to make lucrative investment decisions.

When an insured person sells their life insurance policy, the payment is more than the surrender value but less than the death benefit. After the sale, the purchaser becomes the policy's beneficiary and assumes payment of its premiums. By doing so, he or she receives the death benefit when the policy matures.

Once the life insurance policy matures, and the life settlement pays out, it can pay different amounts to the third party. A variety of costs, such as premium payments and purchase price, affects the ultimate return on any single policy. The payments can range from a few thousand dollars to tens of thousands of dollars, and even up to hundreds of millions of dollars.

Buying a life settlement is fairly simple. Technically, any individual that can sign a contract and has the necessary funds is eligible to purchase a life settlement. However, the process becomes more complex when trying to ascertain the policy’s value, monetary worth, and level of risk. An investor can help you mitigate risk and determine the best purchase price for your policy based on a variety of factors.

When an insured person no longer wants or needs their life insurance policy, they have a few options. First, they can let their policy lapse by discontinuing policy payments. They can also surrender the policy to the insurance company and bypass the earned benefits. The life settlement market, on the other hand, gives them an alternative option to sell their policy in exchange for cash. Selling to a third party is oftentimes much more lucrative than the first two options.

The differences between a life settlement and a viatical are subtle, but there are a few factors that separate the two:

• Life settlements are designed for seniors over the age of 65 with a life insurance policy that is set to mature. In these cases, the senior may be healthy or health-impaired, but they may no longer want or need their policy. Life settlements are an opportunity for the insured to sell their policy in exchange for cash rather than allowing the policy to lapse.

• Viaticals, on the other hand, allows a person with a chronic or terminal illness to sell their life insurance policy. In these cases, the insured person can be of any age, but their life expectancy must be two years or less. Viaticals can be extremely beneficial for individuals with terminal or chronic illnesses to help pay for ongoing care or medical expenses.