More Than A Number

The idea of life settlements became popular in the 1980s during the beginning of the general awareness of AIDS in the United States. During the early years of the epidemic, AIDS patients had a much shorter life expectancy than they do today; thus, many were left with unwanted life insurance policies. To accommodate this circumstance, viatical settlements were created. Viatical settlements provided the opportunity for a terminally or chronically ill individual to sell his or her life insurance policy to a third party for a lump sum. Through a viatical settlement, the third party becomes the new owner of the life insurance plan and must pay the monthly premium until the original owner dies. Shortly after, the senior life settlements industry was born. In order to qualify for a life settlement, a policy owner must be at least 65 and not terminally or chronically ill.  According to Advanced Settlements, policy owners should be over 70, with a life expectancy of less than 12 years, and must have owned a life insurance policy with a face value of $250,000 or more for not less than two years. When a policy owner decides to choose a life settlement, the amount that the individual receives is typically more than the cash value offered by the life insurance company because it is bid upon by various financial institutions.