When does a life settlement make the most sense?

The national life settlement trade association, Life Insurance Settlement Association (LISA), lists common reasons seniors sell their life insurance policies, including:

  • A change in estate planning needs
  • The life insurance policy is no longer needed or wanted
  • Premium payments have become unaffordable
  • Changes in financial and life circumstances (such as divorce, financial hardship, or death of a beneficiary)
  • The policy is about to lapse or surrender

If the policy was purchased to ensure the availability of funds to pay off a mortgage, but the mortgage has since been paid, a life settlement becomes an option.

A policyholder also might wish to distribute the funds of his or her policy to family members and/or friends while still living.