Your life settlement questions, answered.
A complete reference covering the questions we hear most often — from policyholders considering a sale, investors evaluating the asset class, and financial advisors exploring partnership. Thirty answers, organized clearly.
In one paragraph.
A life settlement is the sale of an existing life insurance policy by its owner to a third-party investor for an amount greater than the policy's cash surrender value but less than its full face amount. The seller receives a lump sum payment, and the investor assumes all future premium payments and collects the death benefit when the policy matures. Life settlements are regulated at the U.S. state level and are typically appropriate for policyholders aged 65 or older who no longer need their coverage. High Yield Vault is a life settlement consulting firm that brokers the match between sellers and qualified investors.
Basics
Foundational questions about what life settlements are, how they originated, and how they work at a high level.
What is a life settlement?
A life settlement is a transaction in which the owner of an existing life insurance policy sells it to a third-party investor for more than the cash surrender value offered by the insurance carrier but less than the full face amount (death benefit).
After the sale, the investor becomes the new policy owner and beneficiary. The investor assumes all future premium payments, and when the policy eventually matures, the investor collects the full death benefit. The seller receives a one-time lump sum payment at closing.
How long has the life settlement market existed?
The secondary market for life insurance policies has existed in the United States for more than three decades. It emerged in the 1980s, expanded significantly through the 1990s, and has been regulated at the state level in most U.S. jurisdictions since the early 2000s.
Today, life settlements are recognized by institutional investors — including pension funds, family offices, and endowments — as a legitimate alternative asset class.
How is a life settlement different from a viatical settlement?
Both involve selling a life insurance policy, but they differ by the insured's health status. A viatical settlement typically involves a seller with a terminal or chronic illness and a shortened life expectancy. A life settlement typically involves a senior seller (usually 65 or older) without terminal illness.
The regulatory treatment, tax implications, and market dynamics differ between the two. Life settlements are the more common and broader category.
Are life settlements legal in all U.S. states?
Life settlements are legal and regulated in most U.S. states. More than 40 states have adopted life settlement acts, typically modeled on frameworks developed by the NCOIL (National Council of Insurance Legislators) or NAIC (National Association of Insurance Commissioners).
A few states have unique restrictions or rules. Every transaction brokered through our platform is executed under the regulatory framework of the state in which the policyholder resides.
Who can participate in a life settlement transaction?
A life settlement involves three primary parties:
- The seller — the current policy owner, typically aged 65 or older
- The investor — an individual or entity that acquires the policy as an investment
- The intermediary — a brokerage or consulting firm (like High Yield Vault) that matches sellers with qualified investors and guides both sides through the process
The insurance carrier that originally issued the policy is notified of the ownership change but is not a party to the life settlement transaction itself.
How is the market size of life settlements?
Industry estimates suggest that more than $200 billion in face value of eligible U.S. life insurance policies is held by seniors who could potentially benefit from a life settlement. A significant portion of these policies is surrendered or lapsed annually — often for far less than fair market value would pay.
Actual annual transaction volume varies by year and source, but the market continues to grow as awareness improves among policyholders and their advisors.
For Policy Sellers
Questions from policyholders considering whether a life settlement is the right choice for their situation.
Do I qualify to sell my life insurance policy?
Most policyholders who qualify for a life settlement meet these general criteria:
- Age 65 or older
- Policy with a face amount of $100,000 or more
- Policy held for at least 2 years (past the contestability period)
- A change in health since the policy was issued
Many edge cases qualify, however. The only way to know for sure is a free evaluation with a Policy Specialist — it takes about 10 minutes.
How much is my life insurance policy worth?
Policy value depends on several factors: age, health, policy type, face amount, premium structure, and carrier. Typically, a life settlement pays 3 to 8 times the cash surrender value, though the range varies widely.
For example, a policyholder with a $500,000 universal life policy might be offered $25,000–$75,000 by the insurance carrier to surrender, but $150,000–$250,000 in a life settlement. These are general ranges — actual offers depend on your specific qualifying factors.
Does High Yield Vault buy my life insurance policy?
No. High Yield Vault is a consulting and brokerage firm, not a buyer. We do not purchase policies for our own account.
Our role is to evaluate your policy, explain your options, and connect you with qualified investors in our network who acquire policies as part of their investment portfolio. The purchase is executed between you and the investor — not through High Yield Vault.
Do I have to pay anything to sell my policy?
No. Our consultation and guidance are free to you. No fees, commissions, or upfront costs. We are compensated by the transaction at closing — and only if you accept an offer.
If you decide not to sell, you owe nothing. The evaluation itself costs you nothing.
Is a life settlement taxable?
Generally, yes — at least in part. The proceeds from a life settlement are typically allocated into three tax categories:
- Amount up to your cost basis (premiums paid): tax-free return of basis
- Amount above basis up to the cash surrender value: taxed as ordinary income
- Amount above cash surrender value: may qualify as capital gain
Tax treatment depends on your jurisdiction and specific situation. We strongly recommend consulting your CPA or tax advisor before closing. High Yield Vault does not provide tax advice.
Will selling my policy affect my Medicaid eligibility?
Potentially yes. Life settlement proceeds are considered a liquid asset and may affect means-tested programs including Medicaid and SSI. If you rely on or anticipate relying on these programs, the timing and structure of a settlement matter significantly.
Discuss your situation with your elder law attorney before proceeding. Some structures, such as Medicaid-compliant settlements, may help preserve eligibility. We always encourage involving elder law counsel in these cases.
What happens to my policy after I sell it?
Ownership transfers to the investor who purchased the policy. They become the new beneficiary and assume responsibility for all future premium payments. You are fully released from any premium obligations.
When the policy eventually matures, the investor collects the death benefit — that is how they recoup their investment. You receive your lump sum payment at closing and have no further involvement in the policy. The operational aspects of the policy (premium administration, carrier relationships) are handled by an operational partner in our network.
For Investors
Questions from investors considering life settlements as part of their investment portfolio.
What returns do life settlement investments typically generate?
Historical returns on life settlement investments have generally ranged from 8% to 12% annually, measured as internal rate of return (IRR) at the individual policy level. These returns are derived contractually from the death benefit minus the purchase price and cumulative premiums paid over the holding period.
Because returns are actuarially derived rather than market-correlated, they have historically shown low correlation with equity and bond markets. Past performance does not guarantee future results, and individual policy outcomes vary based on actual life expectancy.
What are the primary risks of life settlement investing?
The four primary risks are:
- Longevity risk — the insured lives longer than estimated, delaying payout and reducing IRR
- Premium risk — cost of premiums rises beyond initial projections
- Carrier risk — the insurance company becomes financially distressed
- Illiquidity risk — no active secondary market for individual policies
Diversification across multiple policies, conservative actuarial estimates, and selection of A-rated carriers are the primary mitigants. Life settlements are suitable only for experienced investors who can tolerate illiquidity.
What is the minimum investment?
At High Yield Vault, the typical minimum investment is $100,000. Most investors begin with allocations in the $250,000–$500,000 range, which allows for diversification across multiple policies.
Specific minimums may vary based on policy structure and investor profile. A discovery call is the best way to understand what works for your situation.
How are life settlement investment returns taxed?
Tax treatment of life settlement investments is complex and depends on your jurisdiction, holding structure, and the nature of the gain. Generally, proceeds above cost basis (purchase price + premiums paid) are taxable.
The portion may be classified as ordinary income, capital gain, or a combination, depending on various factors. Consult your tax advisor before making any allocation decision. High Yield Vault does not provide tax advice.
Can I exit a life settlement investment before policy maturity?
Life settlements are illiquid long-duration assets. There is no active secondary market for individual policies after acquisition. Early-exit prices typically reflect significant discounts to actuarial value.
Life settlements are only appropriate for capital that does not need short-term access — generally a 5 to 10+ year investment horizon. Honest suitability conversations are part of our initial consultation process.
What due diligence does High Yield Vault conduct on each policy?
Every policy presented to investors through our platform passes four layers of review:
- Actuarial — independent life expectancy estimates from licensed underwriters
- Carrier — A-rated U.S. insurance carriers only, with multi-agency rating cross-verification
- Legal — clean title, contestability period cleared, no STOLI flags
- Structural — IRR hurdle rates, premium stress-testing, downside scenarios
Policies that do not pass this review never reach our investor marketplace.
Do investors need to be accredited or licensed?
Life settlement investments do not require the investor to hold a regulatory license. The life settlement transaction itself is regulated at the state level from the seller's perspective, but the investor does not need to be a licensed entity.
That said, life settlements are complex, illiquid, long-duration assets. We work with qualified investors — those with meaningful experience in alternative investments, sufficient capital to tolerate the illiquidity, and appropriate investment horizons. The determination of suitability is part of our initial consultation.
For Advisors
Questions from financial advisors, CPAs, estate attorneys, and insurance professionals exploring our referral partner program.
What is the Advisor Partner Program?
The High Yield Vault Advisor Partner Program is a referral relationship for financial advisors, RIAs, CPAs, estate and elder law attorneys, and insurance professionals. Participating advisors refer qualifying senior clients to High Yield Vault for life settlement evaluation and earn referral compensation at closing — without disrupting their client relationship or core fee structure.
Full details are available on our Advisors page.
Will referring a client disrupt my AUM or fee structure?
No. A life settlement monetizes a non-AUM asset — a life insurance policy — that is not part of your advisory fee base. We do not advise the client on what to do with the proceeds; that is your role.
In most cases, the proceeds flow back into your AUM as new assets under management, making the referral a net positive for your practice.
Am I required to disclose the referral fee to my client?
That depends on your jurisdiction, your regulatory body (SEC, FINRA, state insurance department, state bar), and your client agreement.
We strongly recommend consulting with your compliance officer or legal counsel before referring. We provide template disclosure language for your review, but the responsibility for proper disclosure rests with you as the referring advisor.
How is advisor compensation structured?
Referral compensation is paid at closing, from the brokerage fee we receive at transaction completion. Fees are competitive with industry standards and tiered based on case complexity, policy size, and referral volume.
Exact compensation terms are finalized through our Channel Partner Agreement during onboarding. Importantly, compensation is not deducted from what the client receives.
What does the referral process look like from my side?
The advisor's involvement is minimal:
- Identify candidates in your book (65+, policy $100K+)
- Refer through our Partner Portal or directly to your Partner Manager
- Co-manage — we consult with the client, keeping you informed at each stage
- Close & earn — compensation paid at closing
Full activation typically takes less than a week. Apply on our Advisors page.
About High Yield Vault
Questions about High Yield Vault's role, business model, and compliance structure.
What exactly does High Yield Vault do?
High Yield Vault is a life settlement consulting and brokerage firm. We evaluate life insurance policies, educate both sellers and investors, and broker the match between policyholders who want to sell and qualified investors who want to acquire policies as part of their investment portfolio.
We do not purchase policies for our own account. We do not provide legal, tax, or investment advice. Our role is to be the trusted intermediary that makes the secondary market transparent and accessible for all parties.
Where is High Yield Vault located?
High Yield Vault is headquartered in Irvine, California. We serve clients across all 50 U.S. states. All consultations are conducted by phone, video call, or email — we do not require in-person meetings. Contact details and hours of operation are available on our Contact page.
Does High Yield Vault hold a life settlement provider license?
No. High Yield Vault operates as a consulting and brokerage firm. We do not purchase policies, and therefore we are not required to hold a life settlement provider license. The purchasers of policies are qualified investors in our network who acquire policies directly from the sellers.
Every transaction brokered through our platform follows the regulatory requirements of the seller's state of residence.
Who are High Yield Vault's operational partners?
Our principal operational partner is Settlement Group, an independent operational services firm specializing in life settlement policy administration. Settlement Group supports the post-acquisition operational infrastructure — premium coordination, annual in-force verifications, beneficiary updates, and ultimately claim processing when a policy matures.
Settlement Group operates independently from High Yield Vault. More details are on our Partners page.
How is High Yield Vault compensated?
We earn a brokerage fee paid at closing, only when a life settlement transaction successfully completes between a seller and an investor in our network. Our compensation is transparent and disclosed to both parties.
We do not charge upfront fees, retainers, or consultation charges. If a transaction does not close, we earn nothing. This structure aligns our incentives with positive outcomes for everyone involved.
Talk with the right specialist.
A 10–15 minute conversation with the specialist matched to your situation is often the fastest way to get clarity.
Considering selling?
Free, confidential evaluation of your policy. No obligation. Speak with John Sandoval, Senior Policy Specialist.
Request EvaluationExploring investing?
Browse individually researched opportunities with full documentation. Discovery call with Jesse Ross, Private Wealth Advisor.
Discovery CallExploring partnership?
Join our Advisor Partner Program. Apply online. Partner Manager responds within one business day.
Apply to ProgramHigh Yield Vault is a life settlement consulting and brokerage firm. We do not purchase life insurance policies for our own account. Our role is to evaluate policies, educate both sellers and investors, and broker matches between policyholders who want to sell and qualified investors who want to acquire policies as part of their investment portfolio.
This FAQ is provided for general informational purposes only. It does not constitute legal, tax, investment, or financial advice. Life settlement transactions are complex and are regulated at the U.S. state level. We strongly recommend consulting with independent legal counsel, a tax advisor, and a financial advisor before making any decision. Past performance does not guarantee future results.
