Are American consumers better off trading in their mature life insurance policies for a “Life Settlement” compared to surrendering the policy back to the insurance company? Two U.S. government agencies took a closer look at the practice.

The studies were released this week by the US Government Accountability Office (GAO) and the US Securities and Exchange Commission (SEC). Both agencies have been working  on the reports for the past year.

The studies recognized the growth of the life settlement market and, significantly, that life settlements are a valuable alternative to the lapse or surrender of a life insurance policy for American consumers.

The 120-page GAO report provides evidence that American consumers benefit from the existence of a regulated life settlement market, documenting that life insurance policyowners received an average of 7 times more in a life settlement than if they had surrendered their policies back to the insurance company.  While citing that there are “inconsistencies” in state regulation, the report concluded that most states do regulate life settlements and that there are very few reports of consumer complaints in the life settlement market.

The SEC report, released almost a year after forming its internal Life Settlements Task Force, examined the history and growth of the life settlement market, with a particular emphasis on investor protection in the market.

“The GAO and SEC reports document that life settlements are here to stay, that they provide tremendous value to consumers and that the rapid development of state regulation of the market, while not always uniform, has provided strong consumer protection in life settlement transactions,” said Doug Head, Executive Director of LISA, the Life Insurance Settlement Association.

“More Americans should learn that before they surrender their policy back to the insurance company that they can sell it in a well-regulated market and receive an average of 700 percent more than the cash surrender value,” continued Head.  Forty states today have life settlement laws to protect consumers representing 86% of the nation’s consumers with legislation currently pending in several other states, most notably Massachusetts and Michigan.


According to the National Association of Insurance Commissioners, since 2007, consistent with the adoption of new life settlement laws, there have been fewer than 20 reported complaints involving life settlement transactions from consumers.

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