Life Settlement Options Put Policyholders in Control

by Stephen E. Terrell

The life settlement industry brings truly great news for seniors who are looking for flexible retirement options. The most significant industry development in years offers seniors a way to have it both ways: gain access to immediate cash while providing for loved ones and future generations. Retained death benefits enable seniors to sell half of a life insurance policy and keep half of the death benefits in their estate.

It puts an end to paying policy premiums while providing liquidity. Retained death benefit options allow seniors to retain a portion of the face value payout of their policy in their estate for their heirs, so they really can have it all.

If you’re surprised by such dramatic new options coming from an industry that hasn’t changed all that much over the years, imagine what it represents for policy holders. Seniors who are in their 70s and in relatively good heath may have a life insurance policy that they don’t need or no longer fits their retirement plans. Settlement options become increasingly attractive when circumstances change. A spouse may have died, or the policy may no longer be needed. But for others, a settlement offers a ready means of cash for pressing medical bills, debt reduction, a revised retirement plan, or even a new policy.

Although there have been thousands of such transactions, many seniors have surrendered unwanted policies or let them lapse. Many state laws require agents to offer clients a settlement option before their policy lapses or is surrendered. Typically, the settlement company purchases these policies; becomes the owner; and assumes premium responsibility. Insureds receive a cash payout, and the settlement company receives the death benefit, which is preferable to surrendering a policy or allowing it to lapse.

Now a clearly superior alternative is the retained death benefit option, empowering seniors as never before. Peace of mind comes from keeping a portion of the policy payout for loved ones while gaining access to immediate cash to supplement retirement years while no longer being burdened with policy premiums.

It’s really a very simple process. A senior with permanent life insurance policies with a face value of $250,000 to $10 million simply submits an application to a settlement provider that offers retained benefits. The best candidates have a life expectancy of four to 10 years. The provider evaluates the policy details and the insured. Preliminary offers are tendered within a week. Settlements are typically 10% to 20% of face value. If an offer with retained benefits is made, the retained portion is always no more than 50% of face value. Here is a typical scenario:

• The insured is 72 with an eight-year life expectancy.

• The insured owns a $1million face value whole life policy.

• An offer to purchase from insured is made for $100,000.

• Beneficiaries receive retained death benefits of $400,000.

• There are no future premiums due from insured.

The entire process takes 90 to 120 days. Beneficiaries are designated, but can’t be changed without permission. Policy owners should consult with financial advisors before selling a policy since these transactions are governed by state regulations that differ from state to state.

Wealth managers, financial planners, advisors, and seniors can soon expect to begin receiving information about life insurance settlements with retained death benefit options. The ability to sell a policy, gain immediate cash to optimize their retirement, and do it while retaining a portion of the policy payout for their heirs and future generations is sure to become an increasingly popular retirement strategy.


Stephen E. Terrell is senior vice president of Market Development and Branding of The Lifeline Program, a life settlement provider based in Atlanta, Ga. Terrell oversees all aspects of marketing including advertising, public relations and social media to educate and build a new market for financial professionals with life settlements, broadening revenue and increasing commissions. For more information, call 770-724-7300 or visit or follow him on Twitter @LifelineProgram.