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Life Settlement Guide: How to Sell Your Life Insurance Policy

At Canadian Life Settlements, we’re dedicated to providing clear, comprehensive guidance on life settlements.

Unlock Your Policy’s Potential: Learn to Transform Your Life Insurance into a Financial Asset Today!

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Definition

Key Terms

Case Studies

Eligibility

Why Sell?

Options

What’s My Policy Worth?

The Process

Resources

Getting Started

What is a Life Settlement?

A life settlement is an innovative financial solution that allows you to monetize your life insurance policy. It’s an ideal choice for individuals who find that their life insurance no longer meets their needs, or who could benefit from immediate financial resources. In a life settlement, you sell your policy to a company in exchange for a cash payment. This amount can be received as a lump sum upfront or through scheduled payments over a period you select, with many seniors choosing regular disbursements to serve as a steady income stream for life. This amount is typically greater than the policy’s surrender value but less than its total death benefit.

For those who are unable to sell their policy due to provincial regulations, there is also the option of a life advance. This is a non-recourse loan that allows you to leverage your life insurance policy as collateral. It provides you with an upfront cash advance, while still maintaining the long-term benefits of your policy for your beneficiaries. The loan is settled from the policy’s death benefit after the insured’s passing, with a portion of the surplus shared with a beneficiary of your choice. This option is perfect for those who need immediate funds but want to retain some benefits of their life insurance policy.

Choosing a life settlement or life advance can significantly enhance your financial flexibility, turning your life insurance policy into a valuable, immediate asset.

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Key Life Settlement and Insurance Terms

These terms cover a wide range of concepts crucial to understanding life settlements and the broader life insurance industry.

Annuity

A financial product that pays out a fixed stream of payments to an individual, primarily used as an income stream for retirees. Life Settlements and Life Advances can be structured as annuities.

Beneficiary

The individual designated to receive the death benefit from a life insurance policy after the insured’s death.

Cash Surrender Value

The amount a policyowner receives if they surrender their life insurance policy to the insurer before a death benefit is paid.

Convertible Term Life Insurance

A term life insurance policy that can be converted into permanent life insurance within a specified timeframe.

Death Benefit

The money paid to the policy’s beneficiaries upon the insured’s death.

Face Value

Another term for the death benefit, the amount paid to beneficiaries upon the insured’s death.

Grace Period

A time frame after a missed premium payment during which the policy remains in force before lapsing.

Illustration

Projections of future premiums required for a life insurance policy, provided by the insurance company.

In-Force

Describes a policy that is active and in good standing due to timely premium payments.

Insurable Interest

A requirement indicating that the policyowner must have a legitimate interest in the continued life of the insured.

Lapse

When a policy is no longer valid due to missed premium payments and the expiration of the grace period.

Policyowner

The individual or entity that owns and controls the rights of a life insurance policy.

Premium

The payment made to keep an insurance policy active.

Rider

An add-on to an insurance policy that provides additional benefits or coverage.

Term Life Insurance

Temporary insurance coverage for a defined period, with level or increasing premiums.

Underwriting

The process by which insurers assess the risk of insuring a client.

Universal Life Insurance

Permanent life insurance with a savings element that accrues cash value, featuring potentially lower premiums than whole life insurance.

Whole Life Insurance

Permanent life insurance with a savings element and fixed, guaranteed premiums.

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History of Life Settlements

Life settlements have an intriguing history, originating in the early 20th century. The concept gained legal recognition in the United States with the 1911 Supreme Court case, Grigsby v. Russell. In this landmark decision, Justice Oliver Wendell Holmes Jr. established that life insurance policies possess all the characteristics of property, meaning they can be transferred and sold by the policy owner.

This ruling laid the foundation for the life settlement industry. However, it wasn’t until the 1980s that life settlements began to emerge as a significant market. Initially, they were a response to the AIDS epidemic, providing a vital financial resource for terminally ill patients who sold their life insurance policies for immediate cash needs.

Over time, the industry evolved and expanded beyond terminally ill policyholders. Today, life settlements are recognized as a valuable financial strategy, particularly for seniors. They offer an opportunity to extract value from life insurance policies that are no longer needed or affordable, providing a new avenue for financial planning and asset management.

The life settlement market continues to grow, driven by increasing awareness and the aging population. It is now a well-established part of the financial landscape, offering policyholders a flexible solution to adapt their financial plans to changing life circumstances.

Canadian Life Settlements is proud to be the first purchaser of Canadian life insurance policies.

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Success Stories

Ben, 74, of Brooklyn, New York

$3,000,000 Policy | Canadian Life Settlements offer: $1,020,000

Originally from Montreal and now residing in Brooklyn, Ben faced rising premiums on his life insurance policy and escalating medical bills due to declining health. Unfortunately, due to the policy being issued by a Canadian insurer, Ben discovered that it was ineligible for consideration by most U.S.-based life settlement companies. This limitation posed a significant hurdle in his search for financial relief.

Canadian Life Settlements provided a solution, offering Ben over $1 million for his policy. This settlement enabled Ben to afford his medical treatments, alleviating financial stress and offering peace of mind during a challenging time.

Peter, 82, of Vancouver, British Columbia

$400,000 Policy | Canadian Life Settlements offer: $80,000

Peter and his wife, reassessing their estate plan, deemed their life insurance policy unnecessary. Initially contemplating surrendering the policy to the insurer for minimal compensation, the situation took a positive turn when Peter’s wife, Diana, sought a more advantageous solution.

By opting for a life advance with Canadian Life Settlements, they received an offer exceeding 20 times the cash surrender value of the policy in upfront cash. This decision maximized the policy’s value and provided significant financial benefits from an asset they were ready to overlook.

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GET ONE STEP CLOSER TO LEARNING THE VALUE OF YOUR POLICY TODAY!

Use our Life Settlement Calculator for a free estimate with no obligation to sell.

Can I Sell My Life Insurance Policy in Canada?

In Canada, the opportunity to sell your life insurance policy is an evolving financial option with varying regulations across provinces. The ability to sell your policy depends largely depends on the province in which you reside. Currently, life settlements are eligible for policies that are issued in Quebec. For policies issued in all other provinces, Quebec included, Canadian Life Settlement can offer a life advance.

To initiate the process of selling your life insurance policy, it is essential to first determine if you meet specific qualifying criteria, including:

  • Possess a life insurance policy with a minimum death benefit of $100,000; policies with lower benefits are generally ineligible, barring significant health impairments.

  • Eligibility commonly applies to policyholders aged 70 and above.

  • A decline in health since the policy’s issuance may enhance eligibility; however, it is not mandatory.

While traditionally the market for life settlements in Canada has been more restrictive compared to other countries like the United States, recent developments indicate a growing interest and future potential for this emerging market.

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Why Do People Sell Their Life Insurance Policy?

As health care expenses, long-term care fees, and daily living costs continue to climb, many retirees face the reality of needing additional funds. Below are key motivations for considering the sale of your life insurance policy:

Unaffordable Premiums

For some policyholders, the cost of maintaining life insurance becomes prohibitive, especially if their financial situation has changed. Selling the policy through a life settlement can eliminate these premium payments while also providing a financial return.

Accessing Funds for Essential Expenses

In times of financial strain or significant economic shifts, monetizing your life insurance policy emerges as a practical solution to access the equity accumulated over time. This approach can provide the necessary funds for critical expenditures such as assisted living, medical expenses, or even paying premiums for another policy.

Policy No Longer Needed

The original reason for purchasing life insurance, such as providing for dependents or covering a mortgage, may no longer apply. In such cases, the death benefit of the policy becomes less critical, making a life settlement or advance an attractive option to realize its current value.

Leveraging Your Policy for New Opportunities

Monetizing your life insurance policy can be a strategic move if you’re aiming to reallocate the equity built up in the policy towards more pressing or lucrative opportunities. Whether it’s launching into a new business venture, acquiring a new property, settling debts or outstanding taxes, investing in an annuity for a reliable income stream, or seizing a new investment opportunity, tapping into this equity through a life settlement or advance provides the financial flexibility to pursue these objectives.

Supplemental Income for Retirement

In Canada, The Motley Fool suggests the savings required for a couple to comfortable retirement today to be at least $1,211,325 to cover $48,453 of expenses annually for the next 25 years. Opting to monetize your life insurance policy can unlock a substantial sum, offering you the freedom to use the funds as you wish to enhance your retirement.

Additional Funds for Long-Term Care

As the costs associated with long-term care in Canada continue to rise, many individuals are finding themselves in need of additional financial resources to ensure they can afford quality care. Opting for a life settlement or advance offers a practical solution to navigate the challenges of funding long-term care, ensuring peace of mind during your retirement years.

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What Are My Options For Monetizing My Policy?

Traditional Settlement

The traditional option is the sale of the entire policy for an upfront cash amount.

You are released from all future responsibilities related to the policy, including premium payments. The buyer assumes all subsequent obligations, ensuring you have no further financial commitments to the policy

  • Cash Lump Sum
  • No Future Payments

Income for life

The sale of your policy for a series of payments. Provides a steady stream of income over a specified period, offering financial security and peace of mind.

Both you and your beneficiary are assured of receiving regular income payments for the duration of the term. These payments continue irrespective of the policy’s status.

  • Cash lump sum
  • Guaranteed Income
  • No Future Payments

Retained Death Benefit

The Retained Benefit option allows you to stop paying premiums while still keeping a portion of your policy’s benefits.

Beneficiaries receive a guaranteed percentage of the death benefit and you have no further obligations or payments to make.

  • Guaranteed Percentage of Death Benefit
  • No Future Payments

Partial Settlement

The Partial Settlement option offers a tailored solution by allowing you to sell a part of your life insurance policy.

With this option, you receive a cash payment now, your beneficiary gets a guaranteed percentage of the benefit when the policy ends, and you have no further obligation to pay future premiums.

  • Guaranteed Percentage of Death Benefit
  • Cash Lump Sum
  • No Future Payments

Life Advance

The Life Advance option presents a unique opportunity to access immediate funds by using your life insurance policy as collateral for a non-recourse loan.

The loan is fully repaid from the policy’s death benefit, ensuring you have no personal repayment obligation. Upon settlement, surplus from the death benefit after loan repayment is shared with your designated beneficiary

  • Cash Lump Sum
  • No Future Payments
  • Beneficiary Benefits
  • Available In All Provinces
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GET ONE STEP CLOSER TO LEARNING THE VALUE OF YOUR POLICY TODAY!

Use our Life Settlement Calculator for a free estimate with no obligation to sell.

How Much Is My Policy worth?

Determining the cash value of your life insurance policy in a life settlement or life advance is nuanced, as it hinges on various personal and policy factors. To offer a tailored estimate, we provide a specialized Policy Valuation Calculator. Here’s a breakdown of how different elements influence your policy’s value:

  • Life Expectancy: Calculated from health, age, and lifestyle, life expectancy is a crucial determinant. Our underwriting team assesses these factors to estimate how long the insured is expected to live, impacting the policy’s value.
  • Age of the Insured: Generally, older policyholders may receive higher offers due to life expectancy and the anticipated premium obligations.
  • Health Condition: The current health of the insured significantly affects life expectancy calculations and, consequently, the policy’s value.
  • Premium Schedule: Defined at policy initiation, this outlines your premiums over time. Higher premiums can decrease the settlement offer since they affect the cost to keep the policy active.
  • Premium Payments: Estimating future premiums based on the premium schedule and life expectancy helps determine the offer. More anticipated payments can lower the upfront offer.
  • Policy Type: The policy type influences both eligibility and potential payout. Permanent policies (like universal or whole life) often fetch higher settlements. Term policies are eligible though need to be convertible.
  • Length of Ownership: Policies need to be in force for at least 2 years to be eligible for life settlements or advances.
  • Policy Size: Larger policies typically lead to larger payouts, as the settlement amount is often a percentage of the policy’s face value.

Each of these factors plays a role in the final offer for your life insurance policy. To get a personalized estimate, use our Policy Valuation Calculator, providing a straightforward way to gauge your policy’s market value.

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How To Sell Your Life Insurance Policy

Canadian Life Settlements has created an efficient process to make it easy to monetize your life insurance policy. We are a direct buyer, cutting out the middleman and ensuring you that we can pay you more. The process can be described in the following steps:

  1. Initial Assessment:
      • Share your policy and health details with us.
      • We review your age, health status, policy type, and premium obligations.
  2. Application Submission:
      • Provide more information about your policy.
      • If health issues exist, we’ll request additional details to understand your situation better.
  3. Policy Evaluation:
      • Our team calculates life expectancy using advanced actuarial techniques.
      • We then determine a potential offer range based on your policy’s specifics.
  4. Receiving an Offer:
      • We communicate our offer directly to you or through your financial advisor.
      • An official Offer to Purchase is emailed upon verbal agreement.
  5. Offer Acceptance and Closing Process:
      • Complete and return the Life Settlement Agreement or Loan Agreement.
      • Necessary documents with the insurance carrier are finalized, including any changes in beneficiary or ownership.
  6. Funds Disbursement:
    • After all verifications, funds are transferred to you.
    • You confirm receipt with a signed acknowledgment to us.
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How Long Does Selling Your Policy Take?

At Canadian Life Settlements, our goal is to complete the life settlement process within 30 days or less. However, the timeframe can vary depending on the specific details of each case.

The process involves multiple parties, including the insured individual, the insurance company, the settlement provider, medical records offices, and financial institutions. The speed at which these parties respond and communicate with each other plays a crucial role in determining the overall timeline.

We’re committed to facilitating the sale of your life insurance policy as swiftly and efficiently as possible.

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What Types of Life Insurance Policies Qualify to Be Sold?

Most types of life insurance policies can be sold through a life settlement, offering you an opportunity to convert your policy into a financial asset.

Certain policies, like universal life and other permanent insurance types, typically meet the criteria for a life settlement more readily. However, all policies, including whole and term life insurance, are potential candidates, even though they may require additional qualifications.

At Canadian Life Settlements, we are committed to guiding you through every step of the process. We ensure you have a clear understanding of everything involved, from the valuation of your policy and the underwriting process to the costs and potential returns. Our goal is to provide you with all the information you need to make an informed decision that benefits you and your family’s future.

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Can I Sell a Portion of My Life Insurance With a Life Settlement?

Absolutely. Selling your life insurance policy through a life settlement doesn’t mean you have to give up the entire death benefit. While life settlements typically involve selling the full policy, the retained death benefit option allows you to preserve a portion of the death benefit for your beneficiaries. This means a guaranteed percentage of the death benefit remains intact until the policy concludes.

Choosing the retained death benefit option also means you’re relieved from the responsibility of making any more premium payments. This can be particularly advantageous if you find the premiums unaffordable but still wish to ensure your beneficiaries receive some financial benefit. This approach provides flexibility, allowing you to meet your current financial needs without sacrificing the future security of your loved ones.

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How Do I Get Started on Selling my Policy?

If you’re considering selling your life insurance policy, a great first step is to use Policy Valuation Calculator. This easy-to-use tool can give you an initial estimate of your policy’s value, helping you understand the potential financial benefits of a life settlement.

At Canadian Life Settlements, we offer an initial, complimentary evaluation with no obligation to proceed. Within 24 hours of getting in touch and verifying your eligibility to sell your policy, we aim to provide you with a preliminary offer. Our commitment is to you, the policy owner. We’re here to support and guide you through this process, making it as smooth and straightforward as possible.

to top

GET ONE STEP CLOSER TO LEARNING THE VALUE OF YOUR POLICY TODAY!

Use our Life Settlement Calculator for a free estimate with no obligation to sell.

Resources

Preventive Health Measures Every Senior Should Consider

As we embrace the senior years, proactive health care becomes increasingly important. Preventive health care is about more than just responding to illnesses; it’s about routine monitoring, early detection, and making lifestyle choices to combat common age-related health issues effectively.

Read Article

Retirement Ready: How to Adjust Your Financial Plan Post-Retirement

Transitioning into retirement is a significant shift that calls for a re-evaluation of one’s financial landscape. The diligent years of saving and investing give way to a period where the focus is on the management and utilization of these funds.

Read Article

Pros and Cons of Senior Living Communities vs. Home Living

The decision of where to live during retirement is more than just a matter of preference. It’s a choice that impacts one’s finances, social life, and overall well-being. Many retirees face the crossroads of moving into a senior living community or continuing to live in their own home. 

Read Article

Determining Your Life Settlement’s
Value in Canada

Life settlements are gradually gaining attention in Canada, allowing individuals to realize potential financial gains from unwanted or unneeded life insurance policies.

Read Article

Navigating Retirement: The Pros and Cons of Downsizing Your Home for Canadian Seniors

Entering into retirement presents numerous opportunities to redefine your lifestyle. One of the decisions that may arise is whether to downsize your home.
Read Article

Debunking the Top Myths About Life Settlements

Understanding the true landscape of life settlements is critical to unlocking the full value of your life insurance policy. Don’t let common misconceptions deprive you of the potential financial opportunities that your policy may provide.
Read Article

Estate Planning Essentials: Protecting Your Legacy in Canada

As you advance in years and look towards retirement and beyond, the importance of planning for the future becomes increasingly clear. Central to this is estate planning, a crucial step in ensuring that your wishes are respected, and your loved ones are provided for.
Read Article

Life Insurance: From Protection to Profit – The Transition to Life Settlements

Life insurance has long been recognized as an essential financial tool to protect loved ones and provide peace of mind. However, as the policyholder’s circumstances and needs change over time, what was once a safeguard may transform into an untapped asset.
Read Article

Why More Older Policyholders Should Consider Selling Their Life Insurance Policies

In today’s dynamic and uncertain financial landscape, it is crucial for older clients to explore all available options to maximize the value of their life insurance policies.
Read Article

A Retired Chartered Accountant Shares His Story

In today’s dynamic and uncertain financial landscape, it is crucial for older clients to explore all available options to maximize the value of their life insurance policies.
Watch Video

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