We are always reading and hearing about the great opportunities that seniors have in selling their existing life insurance policies for cash. These deals are called “life settlements” and are, of course, very tempting to seniors who would like to get their hands on some cash and have a splurge – perhaps the last splurge of their lives. This life settlement, or senior settlement, as they are sometimes called, involves selling an existing life insurance policy to a third party, a person or an entity other than the company that issued the policy, for more money than the policy's cash surrender value, but less than the net death benefit.

A life settlement deal can raise money for people who would otherwise just surrender their policies or allow them to lapse, or for people whose life insurance needs have changed. But this deal is not for everyone. Life settlements can be costly and selling it can have unforeseen consequences. Moreover, even if it is the correct thing for you to do, how can you tell if you’re getting a fair price?

So before you run off and sell your life insurance policy to a third party, protect yourself by knowing exactly what’s in your policy so that you understand all your options. You should then learn all there is to know about life settlements and shop around for the best offer. Deal only with licensed buyers and brokers.

Up until fairly recently, if you had a life insurance policy that you no longer wanted or needed for any reason, there were 2 things you could do with it:
o Surrender the policy for its cash value or
o Allow it to lapse.
Because of changes in the insurance laws, there is now a third option: Sell your policy to an entity other than the insurance company that issued the policy in a transaction known as a ‘life settlement’.

This new option has become highly popular. Many older people suddenly realize that they don’t need insurance policies. Their children are wealthier than them and more than this, they themselves could use and enjoy some spare cash. So they will die without leaving an estate, so what? The life settlement market has expanded rapidly in recent years. One recent study estimates that existing policies with a collective face value of $5.5 billion were sold by policyholders to investors in 2005, while others suggest that today’s potential market exceeds $100 billion.