How do life insurance settlements work?

Answer 1

Life settlements involve the sale of an in-force life insurance contract, by the contract owner, to a third party. Generally, the seller of the policy receives the policy's cash value, plus an additional amount determined by an appraisal-termed the "current market value." In consideration of the monies paid to the policy owner, the third party is: named the policy owner and beneficiary, continues to pay all premiums as they come due, and will receive the policy proceeds upon the death of the person insured under the policy. All types of life insurance, term, universal or whole life, can have market value much like real estate or equities. And, given the right circumstances, a life settlement can make a lot more sense than allowing an in-force life contract to lapse.