Life Settlement Glossary
Clear definitions for the terms you'll encounter during the life settlement process.
A
Absolute Assignment
The legal transfer of all ownership rights in a life insurance policy from the policyholder to a new owner (the buyer) as part of a life settlement transaction.
B
Beneficiary
The person or entity designated to receive the death benefit of a life insurance policy upon the insured's passing.
Broker
A licensed intermediary who represents the policyholder in a life settlement transaction, marketing the policy to multiple institutional buyers to obtain competitive offers.
C
Cash Surrender Value
The amount of money a policyholder receives from the insurance company if they voluntarily terminate (surrender) their policy before it matures or the insured dies.
Convertible Term Policy
A term life insurance policy that includes an option allowing the policyholder to convert it to a permanent policy (whole life or universal life) without a new medical exam.
D
Death Benefit
The face amount of a life insurance policy — the sum paid to the beneficiary upon the death of the insured.
F
Face Value
The stated value of a life insurance policy, also called the death benefit or face amount. This is the amount the insurance company promises to pay upon the insured's death.
Flat Fee
A predetermined fixed-dollar broker fee assigned according to the applicable settlement-offer tier rather than calculated as a percentage of settlement proceeds. Trust Life Settlements uses a five-tier flat-fee model: the settlement offer/proceeds determines which tier applies, and the fee within that tier is a fixed dollar amount.
I
Institutional Buyer (Provider)
A licensed entity — typically a fund, financial institution, or investment group — that purchases life insurance policies on the secondary market.
Insured
The individual whose life is covered by the insurance policy. The insured is not always the policy owner.
Irrevocable Beneficiary
A beneficiary designation that cannot be changed without the beneficiary's written consent. Policies with irrevocable beneficiaries may face restrictions in life settlement transactions.
L
Life Expectancy (LE)
A medical estimate of how long the insured is expected to live, typically provided by a third-party underwriting firm. Life expectancy is one of the primary factors in determining a policy's settlement value.
Life Settlement
The sale of an existing life insurance policy by the policyholder to a third-party buyer for a lump-sum payment that is greater than the cash surrender value but less than the full death benefit.
Lapse
The termination of a life insurance policy due to non-payment of premiums. A lapsed policy has no value and provides no death benefit.
N
Net Offer
The amount the policyholder actually receives after all fees and costs (broker fees, closing costs) are deducted from the gross settlement offer.
P
Percentage-Based Fee
A traditional broker compensation model where the fee may equal approximately 20% to 30% of settlement proceeds. This means the broker's fee increases as the offer increases.
Policy Owner
The person or entity that owns a life insurance policy and has the legal right to sell, transfer, or surrender it. The policy owner is not always the insured.
Premium
The periodic payment required to keep a life insurance policy in force. Premiums may be paid monthly, quarterly, or annually.
Provider
See Institutional Buyer. In the life settlement industry, "provider" refers to the entity that purchases the policy from the policyholder.
R
Rescission Period
A state-mandated window of time (typically 15–30 days after closing) during which the policyholder may cancel the life settlement and have the policy returned with no penalty.
S
Secondary Market
The marketplace where existing life insurance policies are bought and sold between policyholders and institutional investors.
Settlor
The policyholder who sells their life insurance policy through a life settlement transaction.
T
Tier (Fee Tier)
A pricing bracket used in Trust Life Settlements' flat-fee model. Tiers are based on settlement proceeds (the gross offer amount), and each tier has a fixed fee — not a percentage.
U
Underwriting
In the life settlement context, the process by which third-party firms evaluate the insured's medical records and health status to estimate life expectancy.
Universal Life Insurance
A type of permanent life insurance with flexible premiums and an adjustable death benefit. Universal life policies are among the most commonly settled policy types.
V
Viatical Settlement
A type of life settlement specifically involving a policyholder who is terminally or chronically ill (typically with a life expectancy of two years or less). Viatical settlements may receive different tax treatment than standard life settlements.
W
Whole Life Insurance
A type of permanent life insurance with fixed premiums, a guaranteed death benefit, and a cash value component that grows over time. Whole life policies are eligible for life settlement transactions.
Have Questions About Your Policy?
Our team can walk you through the process in plain language — no jargon, no pressure.
Let's Talk