Life Settlements vs. Accelerated Death Benefits: Which Is Right for You?
If you're considering accessing the value of your life insurance policy, you may have two options: a life settlement or an accelerated death benefit. Understanding the differences can help you make a more informed decision.
Two Ways to Access Your Policy's Value
When policyholders face a serious health diagnosis or financial need, they often learn about two options for turning their life insurance into cash: life settlements and accelerated death benefits (ADBs). While both provide cash from a life insurance policy, they work very differently — and the financial outcomes can vary dramatically.
What Is an Accelerated Death Benefit?
An accelerated death benefit is a rider or feature built into many life insurance policies that allows terminally ill policyholders to receive a portion of their death benefit early. Key characteristics:
Eligibility: Usually requires a terminal diagnosis (life expectancy of 12–24 months or less)
Payout: Typically 25%–80% of the death benefit
Cost: The insurance company applies a discount (often 5%–10%) and may deduct future premiums
Speed: Can be processed in weeks since it's handled by your own insurance company
Remaining benefit: Whatever you don't withdraw stays as a reduced death benefit for beneficiaries
What Is a Life Settlement?
A life settlement is the sale of your entire policy to a licensed institutional buyer on the open market. To learn more about how this works, see our guide on what a life settlement is. Key characteristics:
Eligibility: Age 65+ with a policy worth $100,000+ (no terminal diagnosis required)
Payout: Typically 4–8x the cash surrender value — often 15%–30% of face value
Cost: Trust Life Settlements charges a transparent flat fee (not a percentage)
Speed: Typically 2–3 months from start to payment
Remaining benefit: The buyer assumes ownership and all future premiums
Head-to-Head Comparison
| Factor | Accelerated Death Benefit | Life Settlement |
|---|---|---|
| Health requirement | Terminal (12–24 months) | Age 65+ with any health condition |
| Payout amount | 25%–80% of death benefit | 15%–70% of death benefit |
| Who pays | Your insurance company | Third-party institutional buyer |
| Competition | No — single payer | Yes — multiple buyers bid |
| Premiums after | May still owe premiums on remainder | Buyer takes over all premiums |
| Fee transparency | Discount applied by insurer | Flat fee disclosed upfront |
When to Choose Each Option
Choose an accelerated death benefit if:
You have a terminal diagnosis with less than 24 months life expectancy
You want to keep a portion of the death benefit for beneficiaries
You need cash quickly (days to weeks)
Your policy doesn't qualify for a settlement (face value under $100,000)
Choose a life settlement if:
You're 65+ but NOT terminally ill
You want the highest possible payout through competitive bidding
You no longer need or can afford the policy at all
You want complete transparency on fees and offers
Your policy face value is $100,000+
Can You Pursue Both?
In most cases, you can explore both options simultaneously. Get an accelerated death benefit quote from your insurance company while also requesting a free life settlement evaluation. Compare the net proceeds from each and choose the better outcome.
At Trust Life Settlements, we'll help you understand both options and will never pressure you toward a settlement if an ADB makes more sense for your situation. Not sure if you qualify? Check your eligibility or use our life settlement calculator for a quick estimate.
Want to compare your options? Call (800) 216-2513 for a free, no-obligation policy review. Learn how our process works or read our FAQ for answers to common questions.
This content is for informational and educational purposes only and does not constitute financial, legal, or tax advice. Every life settlement transaction is unique. Consult a licensed professional for advice specific to your situation.
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