How Life Settlement Works: Case Examples

Life settlement is a complicated solution that can be a game changer in a range of scenarios. The following examples highlight just a few of the ways life settlement works for different families with the right advisors in place.

Scenario 1: When a Policy Gets too Pricey

Insured: Male age 75
Policy Type: Term
Face Amount: $250,000
Cash Surrender Value: $0
Policy Sale Price: $55,000

This policy owner had purchased a term policy for the income protection it provided. As the need for the coverage diminished and the conversion deadline approached, he was advised to have the policy evaluated. Unable to pay the increasing premium to maintain the policy and left with no option to convert – with a surrender value of $0 – he was prepared to let it lapse. Fortunately, he got in touch with TR Estate Planning first.


Our process helped the policy owner uncover value where none was thought to exist. He sold the policy for $55,000 and used the funds to enhance his retirement.

Scenario 2: Handling a Family's Excess Insurance

Insured: Male age 90
Policy Type: Survivor Universal Life
Face Amount: $2,000,000
Cash Surrender Value: $54,000
Policy Sale Price: $1,100,000

The grantor of this policy had funded premiums for almost 25 years to provide additional liquidity for his family and to balance his estate. As the family needs had changed, his CPA suggested having the policy appraised to understand all available options.


Working with our experts, the client sold the policy for more than 20 times it’s surrender value. With planning properly in place and no additional estate tax issues, they were able to distribute the proceeds of the sale and continue to make gifts for what otherwise would have been premium dollars.

Scenario 3: Changing Needs and Ever-Higher Premiums

Insured: Male age 77
Policy Type: Universal Life
Face Amount: $730,000
Cash Surrender Value: $29,000
Policy Sale Price: $187,500

This policy owner purchased his universal life policy in 2001 for estate planning purposes. After selling his business, his needs changed. The premiums were increasing, and the policy had a loan that made it even more difficult to maintain. After a few years of minimally funding the contract, the policy owner decided it was time to let go.


Thanks to our expertise, the client sold the policy for more than $160,000 above the surrender value. The sale not only relieved him of the loan and the burden of the premium, but it also allowed him address more pressing financial needs.

Scenario 4: When the Trust Can't Maintain the Policy

Insured: Female age 75
Policy Type: Universal Life
Face Amount: $1,344,000
Cash Surrender Value: $110,000
Policy sale price: $217,000

Review of a healthy 75-year-old client’s policy projected the premiums would grow too expensive for the insured’s trust to maintain. The insured and her daughter, the trustee, discussed surrendering the policy. With her health similar to when the policy was issued at preferred rates in 2001, they didn’t think a Life Settlement was an option.


An appraisal determined that the policy’s market value was far in excess of the surrender value. Our efforts yielded a significantly more attractive exit strategy.

These examples offer only a glimpse of the many, varied, and complex situations where life settlement can work – when you have the right experts involved. If you're wondering whether life settlement could be an option for you, contact us today.

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