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Sell Half, Keep Half -- Newest Life Settlement Option

Sell Half, Keep Half -- Newest Life Settlement Option

Retained death benefits allow a senior to sell a life insurance policy for immediate cash but also keep a portion of the death benefit for loved ones

The most exciting development in the life settlement industry in recent years is a new product known as retained death benefits. It enables a senior to sell a life insurance policy for immediate cash but also keep a portion of the death benefit for loved ones. A life settlement provider company will take over premium payments, but the policyholder retains a percentage of the face value payout for his or her beneficiaries.


The life settlement industry has been around for decades, and many seniors have taken advantage of this option to sell an unwanted or unneeded life insurance policy. Some states laws require the life agent to offer the life settlement option whenever a policy is about to lapse or be surrendered. A life settlement can provide immediate cash to pay medical bills, reduce debt, fund a retirement plan, pay for long-term care or even purchase new insurance coverage. The concept is simple: Policyholders, typically in their 70s and healthy, sell a life insurance policy that they no longer need. Perhaps their spouse has passed away or their estate plans have changed, and coverage they purchased years ago is no longer necessary. The settlement company purchases the policy, becomes the owner and takes over premium payments. The insured receives an immediate cash payout and the settlement company receives the death benefit when the insured passes away. The transaction has proven to be a successful alternative to surrendering a policy or allowing it to lapse, and over the years thousands of these transactions have been performed.


With the new Retained Death Benefit option, policyholders have another alternative. It offers a quick liquidity event but also provides a senior or retiree some peace of mind because they keep a portion of the policy payout. And when this is offered and the insured no longer makes premium payments — even though they keep part of the death benefit.  Here's how it works:


A senior with a permanent life insurance policy with a face value of between $250,000 and $10 million submits an application to a life settlement provider that offers retained benefits. Insureds with a life expectancy of between four and 10 years are the best candidates. The life settlement provider company will evaluate the size of the policy, the premium requirements and the life expectancy of the insured and then deliver a preliminary offer — usually within about a week.  Life settlements are typically 10-20 percent of the face value of the policy. At this point, the life settlement provider may make an offer with a retained death benefit.  The retained portion will always be 50 percent or less of the face value and not offered in every situation.


  • 72-year-old insured
  • Eight year life expectancy
  • $1 million face value whole life policy
  • Offer to purchase policy: $100,000 paid to insured
  • Retained death benefit for beneficiaries: $400,000
  • Future premiums due: $0

While offers may be generated in a few days, the entire process takes between 90-120 days.  It's important to note that the seller of the policy will designate the beneficiary for the retained death benefit, which cannot be changed without the beneficiary’s permission.


These transactions are regulated at the state level and not all regulations are the same.   Anyone interested in selling a policy and retaining part of the death benefit should ask their financial advisor about specific regulations in their state.


Financial planners, advisors and seniors with life insurance policies will soon be hearing more about the retained death benefit option as part of a life settlement.  It offers a new level of peace of mind for seniors who want to part with a life insurance policy but keep part of policy payout intact for future generations.



Stephen E. Terrell is Senior Vice President of Market Development and Branding of The Lifeline Program, a life settlement provider based in Atlanta, Ga. You can also follow him on Twitter @LifelineProgram