The Internet's Best Life Settlement Dictionary
Nobody likes hopping into something while scratching their heads because everyone is saying these big words and you have no idea what they are talking about… for that very reason, we aim to solve the head scratching by providing you an opportunity to learn what we are talking about.
- Life Settlement: The sale of an existing life insurance policy to a third party for more than its cash surrender value but less than its net death benefit.
- Viatical Settlement: A type of life settlement specifically for terminally or chronically ill policyholders. The policy is sold for an immediate cash payment that is generally tax-free.
- Lapsed Policy: An insurance policy that has been terminated or cancelled because the policyholder failed to pay the required premiums.
- Cash Surrender Value: The amount of money an insurance company will pay to a policyholder if they voluntarily terminate their policy before it matures or before the insured event occurs.
- Net Death Benefit: The total amount of money the beneficiaries will receive upon the death of the insured, minus any loans or withdrawals against the policy.
- Face Value: The initial death benefit amount stated in the life insurance policy, not accounting for any additional riders or adjustments.
- Policyholder: The individual or entity that owns an insurance policy. This person may or may not be the insured.
- Insured: The individual whose life is covered by the insurance policy. Upon their death, the death benefit is paid out.
- Premium: The amount of money that the policyholder must pay regularly to keep the insurance policy active.
- Maturity Date: The date at which an insurance policy’s benefits become payable, either as a result of the insured’s death or because the insured has reached a certain age.
- Accelerated Death Benefits: A feature that allows the policyholder to receive a portion of the death benefits before death, usually in the case of terminal illness.
- In-Force Policy: A policy that is active and has not lapsed, with all premiums up to date.
- Secondary Market: The marketplace where existing life insurance policies are bought and sold by third parties, often for the purpose of life or viatical settlements.
- Contestability Period: A specific period (often two years) from the start of the policy during which the insurance company has the right to contest or deny a claim.
- Underwriting: The process through which life settlement companies evaluate the risk associated with purchasing a life insurance policy.
- Broker: A professional who represents the policyholder and tries to find a third-party buyer for a life insurance policy.
- Investor: The third-party entity or individual that purchases a life insurance policy as an investment, hoping to make a profit by receiving the death benefit when the insured dies.