What is a life settlement?

A life settlement occurs when someone sells an existing life insurance to another party for an immediate lump sum payment. The buyer then assumes the premium payments and receives the policy benefit when the insured dies. Some states define it legally as: A transaction whereby a life settlement provider acquires a policy insuring the life of an individual who does not have a catastrophic or life-threatening illness or condition by paying the owner or certificate holder compensation or anything of value that is less than the net death benefit of the policy.