Part 5 of 6: Life Settlements

This is Part 5 of a 6-Part Series for families regarding ways to pay for elder care services in Indiana. This information accompanies the 23-page e-book/guide called “A Family Guide to Paying for Elder Care Services in Indiana“, available for free download HERE.

Seniors and their family members should know that there is another option for a life insurance policy that is going to lapse or surrender to theelder care services insurance company.

This option is called a life settlement, also known as a life insurance settlement. A life settlement is a new financial planning tool for seniors who may have a life insurance policy that they no longer need or want. A life settlement is a lump cash payment that is greater than the policy’s cash surrender value and less than the death benefit. Never before have non-terminal policyholders been able to receive capital in excess of their policy’s cash or surrender value to increase their wealth. A life settlement can usually provide anywhere from 2 to 5 times the cash surrender value of the policy.

Some requirements and conditions must be met for a senior to be able to utilize a life settlement. Please remember that these are general conditions and each case is looked at individually:

•             The insured must be at least 65 years of age.

•             The insured has experienced a decline in health since the issue date.

•             The insured’s life expectancy is 17 years or less.

•             The face amount of the policy is at least $100,000.

•             The policy is beyond the two-year contestable period.

The types of insurance policies that qualify for a potential life settlement are:

•             term

•             whole life

•             universal life

•             joint-survivorship

•             group

•             corporate-owned policies (COLI)

•             key-man

•             life policies held in irrevocable life insurance trusts


Why would anyone want to sell their life insurance policy? Here are some situations in which the policy owner may want to consider a life settlement:

  1. The policy owner can no longer pay the premiums and needs relief from them. This is a common situation during retirement when income levels have changed and the premium payment can be strain on finances.
  2. The policy is lapsing or surrendering because it is no longer needed for a variety of circumstances. This is one of the primary reasons to determine if a life settlement is available. If the policy is going to lapse it is wise to explore the option of selling the policy and receiving a lump sum of money.
  3. New insurance coverage or a financial product better fits your current needs. Cost of insurance has changed considerably in the last few years. It is a good time to evaluate your current insurance needs and see if a better performing and cost efficient product is available.
  4. The policy owner needs cash now, such as for medical needs, to assist children or grandchildren, or to supplement retirement income.
  5. The insured has outlived the beneficiaries.
  6. For estate tax planning purposes, it no longer makes sense for the policy to pay out as planned. An example would be that the estate no longer needs insurance for liquidity.
  7. A company’s key man is retiring, thus ending the need to maintain insurance on his or her life.
  8. A buy-sell agreement backed by insurance has been completed.


There are numerous situations in which a life settlement can be beneficial. The reality is that thousands of seniors across the nation are lapsing or surrendering their policies without the knowledge that a life settlement could be available. Now, policies that would have been lapsed or forfeited without determining the fair market value can be sold to investment firms and funding sources for true value.

The life settlement process is not complicated at all.  The policy owner would first simply fill out a life settlement application and requested authorizations. The application includes authorizations to collect medical records and up to date information about the policy to be sold from the applicant’s insurance carrier. Unlike a life insurance application there is no medical examination or physical required.

The settlement company then would retrieve the needed information including attending physician statements, and insurance policy for review.  This information would then be submitted to several funding organizations to receive the highest possible settlement. Settlement offers are then relayed to the policy owner or their representative for acceptance. Upon acceptance of an offer, contracts and insurance policy change of ownership documents are forwarded to the policy owner or their representative for review and signatures. The signed documents are returned to the funding organization. The documents are then forwarded to the insurance company to record the change of ownership.

Upon written verification that changes of ownership and beneficiary have been recorded, settlement funds are paid to the policy owner. At this point the policy owner has 15 days to change their mind and cancel the transaction. The process typically takes 3 to 6 weeks to complete, depending on how long it takes to receive documents such as physician statements.

Another important benefit of the life settlement process is that there is never a cost or obligation involved in determining if a life settlement is available to the policy owner. As previously stated, not every individual will qualify for a life settlement and each situation is looked at individually. However, since there is of no cost or obligation there should be no reason not to explore the option of a life settlement.

In summary, a life insurance settlement is a strong and beneficial financial tool for senior policy owners. With this consumer friendly approach, senior policy owners now have options to receive more money, versus the previously limited options of only a cash surrender or policy lapse.

Grant Shellhammer contributed this information and is a Life Settlement Specialist and works with senior clients on a nationwide basis. He can be reached at 1-888-973-8377 or his website at He would be glad to assist and answer any questions regarding your life settlement needs.

 Next Up: Reverse Mortgages

About Julie Sullivan

Julie Sullivan is the Owner at GreatCare of Indianapolis IN.
GreatCare is a licensed, personal services agency, providing in-home care services to the Indianapolis, Indiana and surrounding areas. We serve the personal health and daily care needs of seniors or individuals who prefer to stay at home, but require assistance with everyday activities, such as dressing, personal hygiene, meal preparation, laundry or errands. Our team of certified nurse aids and home health aids can provide you with personalized, in-home care services to meet your needs, including:
Daytime hourly in-home care
Temporary or post-hospital respite care
24-hour, around-the-clock home care
Morning and evening care
Overnight / Slumber care
In addition, we offer our Care Compass service, to assist in setting the course for the next stage in your loved ones life. We guide you through the currents of aging, and help you find your true north. Our licensed nurses, with experience in hospice and geriatric care, will help guide you through the complex and often sensitive journey of selecting an in-home care service, and will provide a smooth transition to a new way of life for your loved one, without the anxiety and fear.

Our current nursing and management team has more than 75 years of combined experience in the home healthcare services industry. All of our caregivers are bonded, insured and screened thoroughly, so you know you’ll be receiving the greatest care possible. That’s why we stand by our mission: to deliver the same, quality care we expect for ourselves and our loved ones.