Concepts and Definitions

Always Remember: The LESS you know, the MORE you believe!

Concepts and Definitions

Please read the information below to learn more about viatical and life settlements, then contact me to help you take the next steps.

Life Insurance Settlement – the act of assigning all benefits, rights and premium obligations of a life insurance policy to a third party or entity in exchange for a lump-sum cash payment which is less than the net death benefit of the policy.

Life Insurance Settlements are further broken down as follows:

  • Life Settlement – the sale of a life insurance policy in which the insured is over 65 and does not have a life-threatening illness. Minimum age can vary with serious health issues. A life settlement should always be higher than the cash surrender value.
  • Viatical Settlement* – the sale of a life insurance policy of an insured of any age who has been diagnosed with a life-threatening illness and is expected to live  24 months or less. Qualified, properly executed viatical settlement proceeds are free of federal tax.

*Viatical settlement brokers and providers have specific licensing requirements which vary by state and qualify you for any tax exemption. Go to to find your state’s dept of insurance to determine licensing status. 

Life Settlement Professional or Specialist – A person or company whose sole business is that of selling, brokering, purchasing, investing, underwriting or otherwise engaging in the life settlement industry on a daily basis as their only business. Life Settlement professionals do not offer investments, insurance or other financial products ensuring there is no conflict of interest.

 Providers – Companies in business exclusively to purchase life insurance policies on the secondary market* (directly from consumers), at a discount from their face value. Providers get their money to purchase policies from Funders (see below). No two providers are the same and each has their own purchasing parameters. In order to ensure a solid cross section of offers, it behooves sellers to apply to all the different kinds of providers.  This is why a settlement specialist, like Innovative Settlements®, can be invaluable.  We already know each provider’s ways and we use our knowledge and experience to our clients advantage.

*A tertiary market for portfolios also exists

Funders – Funders provide the money to licensed Providers who in turn, purchase the policies from consumers. Funders include banks and other financial institutions; pension funds, hedge funds, trusts, and other financial investment vehicles who lend money or extend credit to the provider companies who purchase policies. Some (OMIT: smaller) providers may use individual investors to fund policies. With each “type” of money, come its own set of requirements and restrictions.

Life Settlement Brokers – Settlement Brokers are specialists who represent policy sellers. Life Settlement brokers are specialists whose sole business is to represent policy sellers in the secondary market.  Professional life settlement brokers do not sell other financial products such as LTCi, life insurance, annuities, etc.  (see Life Insurance Agent). They gather and analyze required information and submit a complete, properly underwritten case to multiple provider companies. In this way, they create an auction to solicit and obtaining, multiple competitive bids from qualified settlement providers. The settlement broker negotiates the highest offer for the policy seller.

Life Insurance Agents are licensed to sell life, health and disability insurance to consumers. Recent changes in regulations now allow life insurance agents to act as life settlement brokers with little or no training in the field of life settlements.

 Settlement Representatives or Agents – Settlement agents or representatives typically represent one provider company (or at the very least owe one particular company the right of first refusal). These people do not always shop the policy around and may or may not get multiple offers, creating a competitive bidding situation which in turn, maximizes the offers.

Insurance Agents and/or Brokers are NOT settlement pros!  While insurance agents are one of the best sources for life settlement clients, they historically have created the most problems for the market. Often unintentional, their enthusiasm combined with lack of knowledge and understanding of this ever-changing, complex, still very new market have created a risky situation for sellers who have chosen to use insurance agents or brokers to handle life settlements.

 Let the seller beware! Despite the best of intentions, the policy settlement market and the basic life insurance industry are extremely different from each other. This is an important decision – go to a life settlement professional who is compassion driven – not a financial services person who is trained to be commission driven!


Do you know that….

More than 90% of all policies can be sold if other criteria is met. Additionally, a settlement expert, like Innovative Settlements, may recognize ways to utilize your current policy that others, not so well versed in this complex market, would recognize. Please don’t assume that your policy cannot be turned into cash – have a settlement expert evaluate it for you! We accept UL, Term, Whole life, group life, Key Man, Survivorship, FEGLI, etc.  If in doubt we’re just a phone call or email away.

Insurance Policy Requirements ~basic qualifying characteristics: 

Life insurance policies must be more than two (2) years old and not subject to a contestability or suicide exclusion.

  • Term policies must be convertible in most cases;
  • Policies with no loans are preferred;
  • Minimum face values are $100,000. (the market for policies under $250,000 is not very competitive).
  • Larger policies with proportionately low premiums are most desirable and offers most competitive;
  • We have buyers of policies ranging from $100,000 to multi-million dollar policies;
  • High profile clients trust us because we understand that discretion is   a must!  Please call and ask for Carole Fiedler.

Please call us at 1-800-905-0114 with your specific situation to determine if your policy will be of interest to providers or email us at

Health Criteria ~ Life Expectancy (LE) 

  • For both viatical and life settlements, the life expectancy (or LE) is a critical factor in computing settlement offers.
  • Life expectancy is what actually determines if a case is a viatical settlement or a life settlement.
  • Life expectancy is determined by independent medical underwriting companies who review the insured’s complete medical records. Gender, lifestyle and age are also considered.
  • In order to properly evaluate any case, it is imperative that we obtain complete medical records from all physicians for this reason.


This is where a settlement specialist can be most beneficial!  We know what to look for and, if possible, will market your policy as a viatical settlement which, without a doubt, will obtain you a higher cash settlement than a life settlement.

  • A life expectancy of 24 months or less is technically a viatical settlement and should be treated as such.  Viatical brokers and funders require specialized licensing in most states and provide the policy seller with specific protections.
  • Proceeds from qualified viatical settlements are federally tax-free
  • In almost all States life insurance agents are not properly licensed to represent viatical clients.  We urge anyone who may fall into this category to use a properly licensed viatical broker to represent you from the start!  Viatical brokers, like Innovative Settlements, are highly qualified to assist you in your life settlement needs as well.

Go to to see if your state requires special licensing to work with a viatical file.

Life Settlement providers require longer LE’s: from 25 months up. Currently the maximum LE acceptable is between 12-15 years. Important Note: Long LE’s translate to minimal payments. Any policy seller with a long LE should seriously consider holding on to their policy until their situation and age changes so that they may reap greater benefits at a more optimal time. We can help you determine the best way to proceed. Just call for your free consultation.

  • A final note: There are exceptions to every rule. An experienced settlement broker knows which providers are the most appropriate for any given situation. We know who has money they need to place quickly and when they may be paying a premium to complete a portfolio.
  • Any seasoned settlement broker has access to all the same providers as others, but more is not always best. Creating an auction with hand picked companies, specific to our client’s case, rather than blanketing the market as some brokers and life insurance agents do, allow us to create a fair and competitive environment which should reap the greatest benefits more quickly than “throwing out a wide net.”
  • The general rule of thumb is pretty basic: The higher the premium or the longer the LE, the less the settlement. And, the shorter the LE, the less premium will be necessary going forward, will help obtain a higher settlement.


Regulations have been changing rapidly in the past 5 years and not all states require licensing. We are able to do business in most states and for those where we cannot, we will refer you to a trusted friend in the business who can help you. You may also check with your own state’s Department of Insurance to determine if licensing is required. To locate the link for your state’s DOI, go to

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