- Beneficiary
- The person or entity designated to receive the death benefit of a life insurance policy upon the insured's death.
- Broker
- A licensed professional who represents the policy seller and shops the policy to multiple buyers to obtain the best offer. A broker works for you — not the buyer.
- Cash Surrender Value
- The amount an insurance company pays if you voluntarily terminate your policy. Typically far less than what a life settlement offers — sometimes dramatically so.
- Conversion Option
- A provision in a term life insurance policy that allows the owner to convert it to a permanent policy without undergoing a new medical exam. This can significantly increase the policy's marketability.
- Death Benefit / Face Value
- The amount paid to the beneficiary upon the insured's death. This is the number printed on the policy — and the ceiling for what a life settlement buyer will pay.
- Insurable Interest
- A legal requirement that the original policy buyer had a legitimate financial interest in the continued life of the insured at the time the policy was issued. Required at origination — not required for a life settlement.
- Life Expectancy (LE)
- A statistical estimate of how long the insured is expected to live, based on a review of medical records by independent actuarial firms. Life expectancy is one of the most significant factors in determining offer value.
- Life Settlement
- The sale of an existing life insurance policy to a third-party buyer for more than the cash surrender value but less than the death benefit. The buyer assumes responsibility for future premiums and collects the death benefit.
- Life Settlement Provider
- The entity that purchases life insurance policies on the secondary market. Also called a "buyer" or "funder." Providers are licensed and regulated in each state where they operate.
- Premium
- The periodic payment required to keep a life insurance policy in force. After a life settlement, the buyer takes over premium payments — that obligation no longer falls on you.
- Secondary Market
- The marketplace where existing life insurance policies are bought and sold. The secondary market gives policies a real market value beyond what the insurance company offers at surrender.
- Viatical Settlement
- A life settlement involving an insured person with a terminal or chronic illness. Viatical settlement proceeds are often tax-free under IRC Section 101(g), making them especially valuable for those facing serious illness.