Settlement Options Available to Life‑Insurance Policyowners

Direct settlement options for a life‑insurance policyowner

A policyowner can choose a cash surrender value, a life settlement, or an annuity conversion as the settlement option for a life‑insurance policy. Each path determines how the policy's cash value is paid out and what rights the owner retains.

Cash surrender value

By surrendering the policy, the owner receives the accumulated cash value minus any surrender charges. The policy terminates, and no death benefit is payable to beneficiaries.

Life settlement

In a life settlement, the owner sells the policy to a third‑party buyer for a lump‑sum payment that exceeds the cash surrender value but is less than the death benefit. The buyer assumes premium payments and collects the death benefit when the insured passes.

Annuitization

Some policies allow conversion of the cash value into a fixed or variable annuity, providing a stream of income over time rather than a single payment.

Key differences at a glance