According to a joint study by the Society of Actuaries and LIMRA, approximately $900 million of face value of life insurance is lapsed or surrendered each year. That is roughly 4.5% of the insurance that is in force.
If you or your client has a life insurance policy that is no longer needed—or if premiums have become cumbersome—you may be looking at a lapse or surrender of the policy. However, you can get more money for that policy by selling it as a life settlement.
A life settlement is the sale of an existing life insurance policy to an institutional investor. The investor takes over all the premium payments and the owner receives a cash payment that is higher than the current cash surrender value, but lower than the face amount of the policy. A life settlement can provide immediate cash to pay medical bills, reduce debt, fund a retirement plan, pay for long-term care or even purchase new insurance coverage.