A Life Settlement is a financial transaction in which a policy owner (possessing an unneeded or unwanted life insurance policy) sells the policy to a third party for more than the cash value offered by the life insurance company. The purchaser becomes the new beneficiary of the policy at maturation and is responsible for all subsequent premium payments.

Life Settlements are an important development in that they have opened a secondary market for Life Insurance in which policy owners can access fair market value for their policies, rather than accepting the lower cash surrender value from the issuing Life Insurance company.

A Life Settlement is a new product providing an "exit strategy" for life insurance policies that are viewed as too expensive, poor performing, or because the policies no longer meet their needs.

Proceeds from sale are always greater than the Cash Surrender Value.
Policy ownership is transferred to purchaser who assumes payments.
Purchaser is now the new owner of the policy.

Related Links:

http://en.wikipedia.org/wiki/Life_settlements
http://en.wikipedia.org/wiki/Life_insurance