30-second summary
Maintaining your health as you get older can be priceless and allow you to enjoy your golden years more fully while making memories with the people you love most. If your health changes, though, there could be a silver lining in the form of increased life settlement viability.
Because seniors with health conditions have shorter life expectancies, their life insurance policies may be worth more to life settlement providers. In fact, while younger individuals typically do not qualify for a life settlement, significant health issues can also increase their odds of qualifying and getting a large payout.
In this article, we’ll explore why health changes make life settlements more viable. We’ll also look at how a life settlement may allow you to navigate unexpected healthcare costs and long-term care expenses.
Why Health Impacts Life Settlement Value
A standard life settlement transaction works in three basic steps:
- A life settlement provider (like Lighthouse Life) provides a lump-sum amount to a policyholder who no longer needs or wants their life insurance policy.
- The life settlement provider assumes responsibility for making premium payments, keeping the policy in-force over the insured individual’s life.
- When the insured individual passes away, the life settlement provider (or the institutional investor they sold the policy to) collects the death benefit associated with the policy.
Because life settlement providers need to make premium payments on acquired policies, they would prefer to buy policies that come with fewer expected payments. In other words, holding all other factors equal, the life insurance policy of an insured individual with a shorter life expectancy is often worth more to a provider.
As a result, seniors whose health has declined since they originally took out their policy are more likely to qualify for a life settlement. In addition, individuals with health challenges can generally expect to receive a greater lump-sum payment if approved for a life settlement than healthy individuals with an equivalent policy.
Health changes can also make it more likely for younger individuals to qualify for a life settlement, especially if they are facing a terminal or chronic illness. While providers typically work with seniors over the age of 65, younger applicants navigating significant health challenges may also qualify.
Using a Life Settlement for Health Expenses
In addition to making a life settlement more viable, health changes can also make a life settlement more beneficial to policyholders. Unexpected health challenges can often result in increased near-term healthcare expenses in the form of hospital visits, doctor’s appointments, or expensive prescription medications. In the future, higher health insurance premiums and the increased likelihood of requiring long-term care can also create a financial burden.
Such challenges only compound the existing difficulty seniors face in trying to predict and manage their health-related expenses in retirement. According to a 2023 Fidelity analysis and survey, healthcare expenses for U.S. retirees were more than three times greater than what they initially expected. Faced with this gap, the cash generated by a life settlement can be a powerful financial option.
Because the lump sum you receive from a life settlement is your money, it can be used in any way you choose. While this amount will vary depending on the specifics of your policy and your life expectancy, it is not uncommon for life settlement payouts to exceed tens of thousands of dollars. If your health declines unexpectedly, this money could come at a time when it is most beneficial for you and your family.
Can Healthy Seniors Still Quality for Life Settlements?
If you are navigating new health challenges, a life settlement may be more viable and more beneficial. It is important to remember, though, that health issues are not necessarily a requirement to qualify for a life settlement.
Although healthier individuals do have reduced odds of approval and may receive a lower lump-sum amount in exchange for their life insurance policy, the policy of a relatively healthy senior can still be valuable to a life settlement provider. In fact, while life expectancy is an important factor, it is just one of the variables that providers use to determine life settlement values.
Despite reduced life settlement viability, maintaining a healthy lifestyle can actually be more financially beneficial for an individual due to reduced health expenses and long-term care costs. Besides, while financial factors are important to think about, we should not forget the incalculable benefits of being able to enjoy your golden years in sound mind and body.
Ultimately, however, it is vital to understand the options available to you if unexpected health challenges arise. If you are interested in exploring a life settlement, we invite you to estimate your life settlement value with our free online calculator. This initial estimate provides a measure of how much your policy could be worth.
If you would like to discuss life settlements in more depth, especially in the context of health challenges, our experienced team of professionals at Lighthouse Life is here to offer an educational, zero-pressure conversation. Connect with us by phone or email today.
As an accomplished marketing leader, I have successfully built impactful functions in diverse industries. During my career, I have translated complex systems into clear and actionable initiatives that drive growth and revenue. With a deep-seated passion for success, I foster cross-functional collaboration by leveraging my strong relationship-building and communication skills.
