Who qualifies
Most policies do not qualify. Here is what buyers look for, and what tends to rule a policy out.
Buyers are investors. They pay you now and collect the death benefit later, so they need to be confident the policy will stay in force and that the return is worth the risk. That shapes every qualification criterion.
What buyers look for
Usually 65 or older for a life settlement. For a viatical settlement, age is largely irrelevant — the diagnosis governs.
Usually $100,000 or more. Smaller policies rarely find a buyer because the economics do not work for institutional purchasers.
Universal life, whole life, and convertible term policies are the most common. Straight term policies can qualify for viatical settlements without conversion; for life settlements, the conversion window must still be open.
Some decline in health since the policy was issued makes a life settlement more likely to qualify. A terminal or chronic diagnosis opens the viatical route, which typically pays more.
Policies inside the contestability period — usually the first two years — are harder to sell. Most buyers want a policy that has been in force for at least two years.
What tends to rule a policy out
- Policy has already lapsed — once lapsed, it cannot be sold
- Death benefit under $100,000 (with some exceptions for viaticals)
- Term policy with no conversion right remaining
- Policy inside the contestability period
- Insured in excellent health with a long life expectancy
If there is a diagnosis
If there is a terminal or chronic diagnosis, this is a different transaction with different rules. Age stops mattering, the payout is typically several times larger, and the proceeds may qualify for exclusion from federal income tax. Check your policy for an accelerated death benefit rider before doing anything else.
Most policies do not qualify. Find out whether yours does.
One conversation is all it takes. If it does not qualify, we will say so and that is the end of it.