Your Life Insurance Options

As a Canadian consumer, you now have many options to access the value of your life insurance when you want to exit the policy. These can be divided into solutions that are provided directly by your life insurance carrier, and those achieved in the secondary market.

Your life insurance provider may offer the following:

Redeem policy at Cash Surrender Value

There is typically a Cash Surrender Value available to those who wish to sell their policies back to their insurance provider. When surrendering a policy in the earlier years, the cash surrender value will usually be less than what has been paid into the policy as premium payments. You may pay income tax on the amount of the growth of your cash surrender value (information available from your insurer).

Borrow against policy Cash Surrender Value

Some life insurance companies and other lending institutions are also willing to lend a percentage (ie. 70%) against the Cash Surrender Value of a policy.

Lapse your policy by halting premium payments

Many insurance products held by Canadian consumers today do not accumulate a cash value. Therefore, they have no monetary worth in the eyes of the insurance carrier, and the carrier will offer nothing to the consumer for a policy redemption. In these cases, if a consumer has decided to exit their insurance contract, their only option is to lapse premium payments and let their policy expire worthless.

The choices available through the secondary market and facilitated by LILO Inc. :

Sale of policy to 3rd party

Data taken from thousands of life settlement transactions completed in the United States and Europe have demonstrated that on average, a life settlement transaction realized a price more than four times that of the cash surrender value provided by the life insurance companies. – see Transfer language

Borrow against policy Death Benefit Value

LILO will facilitate loans against the Death Benefit Value of a Life Insurance policy, which is generally a much higher amount than the Cash Surrender Value offered by Life Insurance companies. – see advance language

Life settlements are an established, well-regulated asset class around the world.


Some interesting facts ...

  • $7 million a day is paid to seniors in life settlements in the USA.
  • In Canada, only four Canadian provinces (Que. NS, NB, Sask) allow life settlements, with an estimated potential to become a $40 billion industry in these provinces, alone. In all of Canada, the industry could well exceed a $100 billion.
  • A study of 9,002 policies by the London School of Business found, on average, a life settlement transaction produced a cash value of more than four times that of the cash surrender value provided by insurance companies.
  • Warren Buffett has hundreds of millions invested in life settlements.
  • Life settlements are ‘among the most highly-rated investments available,’ as ranked by Franklin Templeton, ‘ … in the same league as government bonds.’”
  • U.S. policy owners received $5.62 billion more than the policy cash surrender values from life settlements from 2006-2009.
  • Life settlement transactions will average approximately $3 billion per year over the next decade in the US.

Life Insurance Settlement Association of Canada

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Life Insurance Settlement Associate of America

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European Life Settlement Association

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