In the past, the main purpose for purchasing life insurance was so that an individual’s loved ones would be provided for upon his or her death. However, due to recent changes in the life insurance industry we have seen an unprecedented paradigm shift that now allows for seniors to receive windfall profits from life insurance policy’s while they are still alive.

This new concept is called "life settlements" and it is made possible due to the emergence of what is being called “the secondary market for life insurance”. Prior to this secondary market, if a person owned a life insurance policy that was no longer wanted, needed, or affordable they had no choice but to surrender it back to insurance company for the cash surrender value. However, in the late 1990's some very smart financial people realized that life insurance is a personal asset, and therefore it can be bought, sold or traded for more than the cash surrender value.

Life settlement companies determine the fair market value of an insurance policy based primarily on two factors, life expectancy and cost of insurance premiums. The shorter the life expectancy and the lower the insurance premium the more a policy is worth. Thus, for the first time ever, it is now possible to determine the value of a life insurance policy while someone is still alive. This ability to determine the living asset value of a life insurance policy has created the opportunity for seniors to monetize their current insurance as well as their unwanted or unused insurance.

An individual can usually be insured equal to his or her net worth; this is called their “insurance capacity”. If a person has a 10 million dollar insurance capacity and already has a 2 million dollar life insurance policy then he or she would have 8 million dollars of unused or unwanted insurance. For the first time ever we can now realize the value in ones unwanted or unused life insurance and actually turn it into money. Several strategies have been recently used and proven to increase an individual’s net worth while they are still alive.