Life Settlement Training Hub

Actuarial Pricing & Secondary Market Calculator

Practice running institutional DCF valuations to understand how policy structure, health ratings, and holding costs impact net present value offers.

Actuarial Policy Valuation

STEP 1 OF 5

What is the total death benefit (face value)?

Select your specific policy face amount for valuation.

Death Benefit Amount

What is the current annual premium payment?

Exact yearly holding cost required to maintain the policy.

Annual Premium Amount

Select the exact age of the insured person

Tap the exact age for precise actuarial market pricing.

90+

What is the insured's current health status?

Determines actuarial mortality rating adjustment factor.

Medical Longevity Outlook

What type of life insurance policy is this?

Governs institutional marketability and underwriting covenants.

Policy Type

Estimated Secondary Market Fair Market Value

$000,000

Actuarial Present Value Model

Analysis running...

Secondary Market Performance & Valuation Report

A side-by-side analysis of carrier cash surrender values and institutional settlement returns.

LISA Market Data Highlights

Key findings on life settlements vs. direct carrier surrender

Multiple vs. Surrender

8.71x

Consumers received nearly 9 times (almost 900%) their cash surrender value through LISA members.

Total Paid Out

$626.6M

Paid directly to policyholders for unneeded or unwanted coverage.

Net Consumer Advantage

+$554.6M

Returned to consumers beyond what insurers offered in cash surrender value.

Average Payout Comparison

Average Carrier Cash Surrender Value $24,360

Average Secondary Market Payout $212,066

Transaction Volume: 2,955 completed transactions in 2025, representing a 9.48% increase year-over-year.

Year-over-Year Shift: The average ratio increased from just under 7x in 2024 to nearly 9x in 2025. This shift was driven in part by a 27% drop in the average cash surrender value offered by insurers ($33,493 in 2024 vs. $24,360 in 2025).

5-Year Aggregate (2021–2025): Over the 5-year tracking window, LISA members paid policyholders $3.6 billion, delivering roughly $3 billion more than insurance carriers' surrender values.

A Key Comparison for Your Clients

Know the key differences so you can match the right solution to the right client—fast, clear, and confidently.

Evaluation Factor	Life Settlement	Viatical Settlement
Who Qualifies	Seniors (typically age 65+) with unwanted or unneeded policies	Individuals diagnosed with a terminal or chronic illness
Health Requirement	No terminal illness required	Must have a life expectancy usually under 24 months
Payout Range	4x–12x more than cash surrender value	Often higher payout due to shorter life expectancy
Use of Proceeds	Retirement, long-term care, or other personal financial needs	Medical bills, immediate living costs, and quality of life during illness
Tax Implications	May be taxable depending on built-up policy gain	May be tax-free if proceeds are used for certified medical care
Regulation	Regulated in most states with comprehensive consumer protections	Highly regulated, often with additional health status validation oversight
Ownership Transfer	Policy sold to an institutional buyer, who assumes future premiums & benefits	Same configuration—purchasing buyer becomes beneficiary and manages the contract
Emotional Considerations	Often evaluated as a strategic personal wealth rebalancing move	Often processed as a necessary late-stage economic financial lifeline
Common Policy Types	Universal life, whole life, and convertible term life contract structures	Any life insurance contract layout, provided value and tracking timelines align

Option A: Life Settlement

Who Qualifies

Seniors (typically age 65+) with unwanted or unneeded policies.

Health Requirement

No terminal illness required.

Payout Range

4x–12x more than cash surrender value.

Use of Proceeds

Retirement, long-term care, or other personal financial needs.

Tax Implications

May be taxable depending on built-up policy gain.

Regulation

Regulated in most states with comprehensive consumer protections.

Ownership Transfer

Policy sold to an institutional buyer, who assumes future premiums & benefits.

Emotional Considerations

Often evaluated as a strategic personal wealth rebalancing move.

Common Policy Types

Universal life, whole life, and convertible term life contract structures.

Option B: Viatical Settlement

Who Qualifies

Individuals diagnosed with a terminal or chronic illness.

Health Requirement

Must have a life expectancy usually under 24 months.

Payout Range

Often higher payout due to shorter life expectancy.

Use of Proceeds

Medical bills, immediate living costs, and quality of life during illness.

Tax Implications

May be tax-free if proceeds are used for certified medical or end-of-life care.

Regulation

Highly regulated, often with additional health status validation oversight.

Ownership Transfer

Same configuration—purchasing buyer becomes beneficiary and manages the contract.

Emotional Considerations

Often processed as a necessary late-stage economic financial lifeline.

Common Policy Types

Any life insurance contract layout, provided value and tracking timelines align.

Life Settlement Case Study

See how a policy evaluation transformed an unneeded asset into capital and eliminated ongoing premium obligations.

John M., 74

Universal Life · Policyholder

Face value

$1,000,000

Annual premium

$28,000

Accepted offer

$150,000

Policy type Universal Life

Face value $1,000,000

Annual premium $28,000

Cash surrender value $25,000

Accepted offer $150,000

•

Situation

John's children became independent and his wife passed away. Premiums were burdensome — his agent only offered surrender or lapse.

•

Solution

His advisor explored a life settlement. The policy was bid amongst investors and John accepted $150,000 — six times the surrender value.

✓

Outcome

Funds supplemented retirement income and created a college fund for grandchildren — eliminating all future premium obligations.

Business: Life Settlements & Non-Medical Underwriting

In standard retail life settlements, an insured’s individual health records and Life Expectancy (LE) reports dictate 100% of the policy's market value. However, in the corporate and enterprise landscape, business owners can frequently exit Corporate-Owned Life Insurance (COLI) assets utilizing alternative portfolio underwriting methods where individual medical exams and health histories are completely bypassed.

Understanding how institutional buyers price these corporate blocks allows B2B financial advisors, accountants, and commercial brokers to unlock massive liquidity from stagnating corporate balance sheets.

How Corporate Life Settlements Bypass Health Underwriting

When a corporation or large business entity looks to liquidate its insurance liabilities, institutional buyers utilize macro-demographic actuarial modeling rather than pulling individual medical records. This occurs through two structural vehicles:

Portfolio Blending & Cross-Subsidization: Instead of purchasing a single policy, an investment fund purchases a "block" of COLI policies covering dozens or hundreds of key employees, executives, or former partners. The investor models the mortality curve of the entire pool based on basic demographic criteria (age, gender, and job classification), allowing healthy individuals to be cross-subsidized by the broader actuarial group.
Guaranteed Issue (GI) Structural Continuity: Many corporate key-person or executive bonus plans were originally written using Guaranteed Issue underwriting. Because the insurance carrier initially issued the policies without medical exams based solely on active employment status, secondary market buyers can utilize those same group actuarial assumptions to price the settlement portfolio.

When Health and Underwriting Factors Shift to "Low Priority"

In a corporate-level transaction, institutional investors care less about an individual’s medical charts and focus primarily on the financial optimization of the asset. Individual health becomes a secondary factor under the following conditions:

High Pool Volume: The portfolio contains enough active lives (typically 20+ policies) to satisfy the Law of Large Numbers, allowing institutional actuaries to accurately forecast cash flows without individual health inputs.
Premium Optimization Ratios: The underlying policies are structured as highly funded Universal Life (UL) or Variable Universal Life (VUL) contracts. If the internal cash value is high enough to dramatically lower the ongoing premium costs required to maintain the death benefit, the "cost of insurance" risk drops significantly for the buyer.
Advanced Age Distribution: If the average age of the executive pool is over 70 or 75, baseline mortality tables provide sufficient statistical predictability for investors, rendering individual health tracking irrelevant.

Key B2B Use Cases for Corporate Life Settlements

This non-medical, portfolio-driven approach is heavily utilized by corporations during major structural changes:

Winding Down Buy-Sell Agreements: When business partners retire, merge, or dissolve an entity, the life insurance funding their corporate buy-sell agreement is often abandoned. Selling the entire block of policies on the secondary market extracts immediate cash for corporate distribution.
M&A and Bankruptcy Restructuring: During corporate acquisitions or liquidations, unwanted COLI/BOLI policies sitting on the balance sheet are frequently sold to institutional buyers to generate immediate, non-correlated working capital.
Phasing Out Executive Deferred Compensation Plans: If a business discontinues a supplemental executive retirement plan (SERP) funded by life insurance, they can sell the portfolio to recover past premium expenditures rather than surrendering the policies back to the carrier for a low cash value.

Advisor Blueprint: How to Identify a Corporate Opportunity

Train your team to look for these exact markers when speaking with business clients, CFOs, or corporate accountants:

Check the Owner & Beneficiary: The policy must be owned by the corporation, LLC, or partnership, not the individual executive.
Review the Volume: Look for situations where multiple key-person or executive split-dollar policies exist within the same firm.
Analyze the Value Gap: Compare the current Cash Surrender Value against the total Face Amount (Death Benefit). If the gap is wide and the corporation no longer needs the coverage, it is a prime candidate for a portfolio life settlement.

💡

Pro-Tip for Advisors

When talking to business clients, never ask them 'How is your health?' out of the gate if they own a corporate block. Instead, ask: 'Is your executive insurance plan still aligned with your corporate liability goals, or are you looking to optimize those balance sheet assets?' This shifts the conversation from a sensitive medical topic to a strategic corporate financial maneuver.

8 Common Questions Partners Ask About Life Settlements

Every year, more than 2.5 million seniors lapse or surrender life insurance policies, often walking away with little or nothing. Many simply don’t realize there’s another option. That includes your clients or their parents. A life insurance policy is a financial asset. And like other assets, it can be sold. That sale is called a life settlement.

In a life settlement, a third-party buyer, typically an institutional investor, purchases the policy for a lump sum of cash. They take over the premiums, become the new owner, and ultimately receive the death benefit. The policyholder receives immediate value, often far exceeding the surrender value. (Nearly 9x Surrender Value: Consumers who sold their policies through LISA members received nearly 9 times (almost 900%) their cash surrender value compared to surrendering directly to the carrier.)

Yet despite increased awareness, life settlements remain misunderstood. Let’s clarify what you need to know:

1. Why would someone sell their policy?

There are countless reasons. The original need for the policy may have changed—a spouse passed, the mortgage is paid off, the kids are grown, a business was sold. Or maybe premiums have become a financial burden. Sometimes, clients want to repurpose their policy to cover long-term care, retirement, or medical expenses.What they often don’t realize: lapsing or surrendering could mean leaving tens or even hundreds of thousands of dollars on the table.

2. What types of policies are eligible?

Almost any type of life insurance can qualify:

• Universal life (most common)

• Convertible term (especially attractive to buyers)

• Whole life, second-to-die, first-to-die, and group policies

Note: Convertible term policies are highly valuable, even for younger or healthier clients. Non-convertible terms may still qualify if the client has significant health issues.

3. How much can a client receive?

Offers vary based on:

• Premiums: Lower future costs = higher value

• Life expectancy: Shorter expectancy = higher offer

• Policy size: Larger face values yield more valueIn 2023, life settlements averaged 6x more than cash surrender value.

4. What size policies can be sold?

• Minimum: Usually $100,000 in face value

• Maximum: No cap

• Some smaller policies can qualify depending on the client’s health.

5. Does the client need to be terminally ill?

No. Health matters, but terminal illness is not required.

• Seniors in their 70s and 80s can qualify even if relatively healthy.

• Younger clients (50s) typically need more serious health conditions.

• Convertible term policies can increase eligibility for healthier individuals.

6. Are life settlements legal?

Absolutely. A 1911 Supreme Court case (Grigsby v. Russell) confirmed that a life insurance policy is personal property and can be sold. Today, the industry is highly regulated:

• Buyers are licensed by state DOIs

• Contracts use DOI-approved languageB

• Beneficiaries and physicians provide sign-offs

• Full transparency and compliance is required

7. How should I talk to clients about this?

You don’t need to be a life insurance expert or the original writing agent. You just need to

• :Let clients know this option exists

• Share an article, a short email, or a newsletter mention

• Talk to your network—This is an opportunity to help your existing clients and grow your business while helping others earn on referrals

Remember: buyers advertising on TV want clients to call them directly—so they can offer less and cut you out. Don’t let that happen. You bring more value when you market the policy to multiple buyers. That’s what we do as a fiduciary broker.

8. What’s the commission structure?

Life settlements work more like real estate than traditional insurance.

• Commissions are negotiable, not fixed

* Capped at 1/3 of the offer or 8% of face value (whichever is less)

• Fully disclosed to the client in the sale agreement

The more we secure for your client, the more value—and commission—you generate. Everyone wins.

FAQs

Get answers to the most common questions about life settlements.

What is a life settlement?

A life settlement is the sale of an existing life insurance policy to a third party for a lump sum cash payment. The buyer assumes responsibility for the policy, including future premiums, and becomes the beneficiary upon the policyholder's death.

Are life settlements regulated?

Yes. Life settlements are heavily regulated transactions governed by state insurance departments and consumer protection laws nationwide. Licensed brokers and providers must adhere to strict compliance guidelines, mandatory disclosures, and regulatory standards designed to protect policyholders and ensure fair market value throughout the process. See more about consumer protection here.

How do I earn for referring clients for life settlements?

When you bring in a client, our team guides them through the entire process from start to finish. Once the policy is sold, you receive a transparent payout percentage based on the settlement amount—no hidden fees, no guesswork.

How do I get started?

Simply connect with our team. We’ll walk you through the process and provide additional free training so you can start offering life settlements today.

Who qualifies for a life settlement?

Your clients could qualify for a life insurance settlement if:

• Their policy is valued at $100,000 or more
• They are 65 years or older
• They are business owners in transition
• They are facing health challenges

What are the benefits of a life settlement?

A life settlement may be beneficial for individuals who no longer need their coverage, find premiums too expensive, have changing financial goals, or need access to immediate cash for retirement, healthcare, or other expenses.

How is the value of a life settlement determined?

The value of a life settlement is determined based on several factors, including the policy’s death benefit, the insured’s life expectancy, the premiums required to maintain the policy, and the policy's cash value.

What happens after the life settlement is completed?

Once the life settlement is finalized, the buyer becomes the new owner and beneficiary of the policy. The policyholder receives the agreed-upon lump sum payment, and no further premiums are required from the policyholder.

How long does it take to complete a life settlement?

The process of completing a life settlement typically takes 6 to 12 weeks, but it can vary depending on the complexity of the policy and the time needed to evaluate the offer.

How do life settlements benefit policyholders?

Life settlements provide a lump sum cash payment to policyholders who may no longer need their life insurance policy. This cash can be used for a variety of purposes, such as medical expenses, retirement income, or paying off debts.

Are life settlement proceeds taxable?

The tax implications of a life settlement vary. The proceeds may be subject to income tax, depending on the policy's cost basis, amount received, health of the seller and what the funds are used for.

Policyholders should consult with a tax advisor to understand the potential tax impact.

Can I reverse a life settlement once it's completed?

No, once a life settlement is finalized, it cannot be undone. It’s important for policyholders to fully understand their options before proceeding with the sale of their life insurance policy.

Once a change in ownership is confirmed, the policyholder has a 15 day right to recession. Compensation is paid after the recession period, and at that point cannot be reversed.

What are the costs involved in a life settlement?

There are typically no out-of-pocket costs to the policyholder. However, the broker or life settlement provider may charge a commission or fee, which is typically paid out of the settlement amount. The policyholder should always understand the fee structure before proceeding.

Will I still have to pay premiums after selling my life insurance policy?

No, once the policy is sold in a life settlement, the buyer assumes responsibility for paying the premiums. The policyholder is relieved of any future financial obligations related to the policy.

How does a life settlement compare to surrendering a policy to the insurance company?

Surrendering a policy to the insurance company typically results in a lower payout, as the insurance company will offer the policyholder only the policy's cash value. A life settlement often provides a higher payout, as it involves selling the policy to a third party who is willing to take on the policy's premiums in exchange for the death benefit.