Until recently, people with unwanted life insurance would either: 1) Let their policy lapse when they couldn't pay for it or 2) Surrender the policy back to the insurer for the cash surrender value.
However, Life Insurance Settlements — also known as Life Settlements or Senior Life Settlements — are a new type of financial service being popularized by specialized brokerages. These brokerages sell your life insurance policy to institutional investors for typically three to five times the cash surrender value of the policy.
A life settlement is a financial transaction in which the owner of a life insurance policy sells an unneeded policy to a third party for more than its cash value and less than its face value. Until recently, if a policyowner opted out of a policy by surrendering the policy or allowing it to lapse, the additional value was relinquished back to the issuing life insurance company. In some cases, an insured’s health may have declined since the policy was issued and the policy may be worth considerably more than the surrender value. A life settlement is an alternative to this surrender or lapse of a policy, or when the owner of a life insurance policy no longer needs or wants the policy, the policy is underperforming or can no longer afford to pay the premiums.
http://plans4retirement.blogspot.com/2010/11/life-insurance-settlements.html
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A long blog post on an interesting blog, I’d recommend checking it at some point for good strategies to look to in retirement.
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