There Is No Single Qualification Formula

Every life settlement provider has its own underwriting criteria. There is no universal checklist that guarantees a policy will qualify. However, the industry has developed general norms that help policyowners understand whether a life settlement is worth exploring.

The Primary Factors

Age of the Insured

The most common starting point is age 65 or older. This is not a legal requirement but rather a practical market norm. Buyers assess life expectancy as part of their valuation, and older insureds generally present a shorter time horizon for the buyer to hold the policy.

Younger policyowners may still qualify in certain circumstances, particularly if health factors are involved, but age 65+ is the typical starting point for standard life settlements.

Policy Size

A death benefit of $100,000 or more is the most common minimum threshold. Policies below this amount may not generate enough value to justify the transaction costs and ongoing premium obligations for the buyer.

Larger policies — $500,000 and above — tend to attract more buyer interest and may be more likely to receive competitive offers.

Policy Type

Several types of life insurance policies can be sold in a life settlement:

• Universal life — The most common policy type in life settlement transactions. These policies have flexible premiums and accumulate cash value.
• Term life — Can qualify if the term is long enough (typically 10+ years remaining) or if the policy is convertible.
• Whole life — May qualify, though the cash value component means the gap between surrender value and settlement value may be smaller.
• Survivorship (second-to-die) — These cover two insureds and may qualify, though valuation is more complex.

Term policies near the end of their term or policies with very high premiums relative to the death benefit may be harder to sell.

Health Status

The insured's health is a significant factor. Life settlement providers use medical underwriting to estimate life expectancy. A shorter life expectancy generally increases the policy's value to a buyer because the buyer will pay premiums for a shorter period.

This does not mean the insured must be in poor health — many life settlements involve seniors in average health. But health is one of several variables that affect whether an offer is made and how large it is.

Premium Cost

Buyers take over premium payments after purchasing a policy. If premiums are very high relative to the death benefit, the policy may be less attractive. Conversely, a policy with low premiums and a significant death benefit may command a stronger offer.

What Does Not Qualify?

Some policies are unlikely to qualify for a life settlement:

• Policies with very small death benefits (under $50,000–$100,000)
• Policies where the insured is under 65 and in good health
• Term policies with less than a few years remaining
• Policies with outstanding loans that significantly reduce the net death benefit

These are general guidelines, not absolute rules. A professional review is the only way to know for certain whether a specific policy may qualify.

The Practical Starting Point

As FINRA notes, the amount a policyowner receives in a life settlement "will depend on a range of factors, including your age, health, and policy terms and conditions."

The practical approach is to gather basic policy information — policy type, death benefit, premium amount, insured's age — and have it reviewed by a licensed professional who can assess whether it meets current market criteria.

This initial review is typically free and carries no obligation. It is an educational step, not a commitment to sell.

Steps to Get Started

If you think a life settlement might be worth exploring, here is a practical path:

Step 1: Gather Your Policy Information

Collect the basic details that any provider or broker will need to do an initial assessment:

• Policy type — Universal life, whole life, term life, or survivorship
• Death benefit amount — The face value of the policy
• Current cash surrender value — What the insurance company would pay if you surrendered today
• Annual premium amount — What you pay to keep the policy in force
• Insured's age — The age of the person whose life is insured
• Policy issue date — When the policy was originally purchased

Step 2: Understand Your Reason for Considering a Change

Providers will want to understand why you are considering a life settlement. Common reasons include:

• Premiums are no longer affordable
• The policy's original purpose no longer applies (e.g., children are grown, mortgage is paid)
• You need cash for retirement, healthcare, or long-term care
• The policy is about to lapse and you want to recover some value before it does

Step 3: Have Your Policy Reviewed

A licensed professional can review your policy details and tell you whether it meets current market criteria. This review is typically free and does not obligate you to sell.

Step 4: Compare Your Options

If you receive a life settlement offer, compare it against:

• The cash surrender value from your insurance company
• The cost of keeping the policy in force (ongoing premiums)
• Your current and future financial needs

Step 5: Get Professional Advice

Before completing any transaction, consult with your own financial, tax, and legal advisors. A life settlement is a significant financial decision, and professional guidance can help ensure it aligns with your overall financial situation.

What to Watch Out For

When exploring a life settlement, keep these points in mind:

• Work only with licensed providers and brokers. Check with your state insurance department to verify licenses.
• Do not feel pressured. A reputable provider will give you time to review the offer and consult your advisors.
• Understand all fees and commissions. Ask how the broker or provider is compensated.
• Know your rescission rights. Most states provide a period during which you can reverse the decision.
• Do not provide personal medical information until you have verified you are working with a licensed professional.