life settlement

noun

Legal Definition of life settlement 

: an agreement by which the owner of a life insurance policy covering a person (as the owner) who is usually a senior citizen receives compensation for less than the expected death benefit in return for the sale, assignment, transfer, devise, or bequest of the death benefit or policy ownership to another party (as a company specializing in such transactions) — compare viatical settlement

Note: Viatical settlement is typically used for the transfer of a life insurance policy for which the insured has a short life expectancy (usually less than two years), while life settlement is used for the transfer of a policy for which the insured has a longer life expectancy.

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