How Life Settlements Support Social Impact and Financial Return

Life settlements are most often discussed in terms of yield, diversification, and portfolio efficiency. But there’s another side to this asset class—one that intersects with social impact, financial fairness, and consumer empowerment. For financial advisors and investors seeking purpose alongside performance, life settlements offer a powerful alignment of values and results.

At the heart of every life settlement transaction is a policyholder—typically a senior aged 70 or older—who has decided to sell their life insurance policy. The reasons vary: they may no longer need the coverage, may find premium payments unaffordable, or may simply want to unlock the asset’s value while they are still alive. In any of these cases, the policyholder gains immediate financial liquidity, often using the funds for medical care, long-term living expenses, or estate planning.

Before the life settlement market existed, these individuals had limited options. Policies were often lapsed or surrendered back to the insurance company for a fraction of their value—sometimes as little as 5% of the death benefit. The development of the secondary market allowed policyholders to access the fair market value of their policies, which can be four to eight times higher than the surrender value.

Social Benefits of Life Settlements:

• Financial Empowerment: Seniors are able to monetize an underutilized asset to fund healthcare, housing, or retirement.


• Consumer Choice: The existence of a transparent secondary market forces insurers to acknowledge the real value of life insurance.


• Estate Flexibility: Proceeds from life settlements can be used for charitable giving, trust planning, or intergenerational wealth transfers.


  
  

From the investor’s perspective, life settlements offer attractive return characteristics. But just as importantly, they enable participation in a market that provides meaningful financial relief to individuals who would otherwise forfeit their policies.

The life settlement industry is now regulated in more than 40 U.S. states, with rigorous licensing, disclosure, and consumer protection requirements. These regulations have not only improved investor protections but also helped ensure policyholders are treated fairly and ethically.

As financial professionals continue to balance fiduciary responsibility with growing client interest in impact investing, life settlements present a rare case of alignment: a strategy that delivers on both performance and purpose.

Sources:

Wharton School Research on Life Settlements & Policyholder Value: https://lgst.wharton.upenn.edu


LISA (Life Insurance Settlement Association): https://www.lisa.org