Senior Life Settlement 101

2007-03-08 10:33:40

( Financial )



Senior citizens who are interested in securing a huge sum of money have limited options. Financial institutions or loan providers might be wary of lending huge sums of money to elderly people primarily because of their ability to pay the loan in full. One alternative source of money for senior citizens is the senior life settlement. Such senior settlements involve the sale of the life insurance policy of an elderly person to a third party, including life settlement companies, at a price usually lower than the face amount of the policy. The owner of the life insurance can sell the policy even if it is not yet fully paid. The responsibility of paying the policy’s remaining premiums is transferred from the seller to the buyer. As a general rule, however, the senior life settlement amount must be greater than the accumulated cash payment made on the policy until the transaction date.

Senior life settlement versus viatical settlement

A lot of people think that senior life and viatical settlement are the same. They are unaware that these two transactions are different one from another. Senior settlements can be availed only by senior citizens, regardless of the state of their health. On the other hand, viatical settlements are given to people who are terminally ill, regardless of their age.

Why senior citizens decide to settle their life insurance policy

The main reason why a person gets a life insurance policy is to ensure the financial security of his or her family in case he or she dies. Those who get such an insurance policy are usually young and are in the process of building their families. However, as you get older, your responsibility to your family diminishes. Your children learn to take care of themselves as they get older. Thus, your original purpose of getting the insurance policy may no longer be applicable when you become a senior citizen. Thus, when a need for a huge sum of money arises, many elderly people decide to get senior settlements. They use the money they get from the settlement to buy a house, to pay for senior health insurance, or simply to have a vacation.

Another reason that compels senior citizens to settle their life insurance is to avoid the lapse of the policy. Some retired individuals can no longer pay for their insurance premiums because they no longer have ample source of income. Thus, instead of letting the policy lapse, many elderly people just opt for senior settlements.


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