In a life settlement transaction, what does the policy owner receive?

In a life settlement transaction, the policy owner receives an amount that is less than the policy's death benefit. This amount is typically negotiated between the policy owner and the buyer and is based on factors such as the insured's life expectancy, the amount of premiums paid, and the current market for life insurance policies. The purpose of a life settlement is to provide the policy owner with immediate cash value, allowing them to access funds instead of letting the policy lapse or surrendering it for a lower cash value.

Options suggesting an amount equal to the death benefit or a premium refund do not accurately reflect the nature of life settlements, which are designed to provide a return that accounts for the present value of future premiums and expected mortality. Similarly, the notion of receiving a new life policy does not apply in this context, as life settlements involve the transfer of an existing policy to another party rather than issuing a new policy. Thus, receiving an amount less than the death benefit aligns with the typical structure of life settlement transactions.