A simple definition of life settlement is, "a secondary market for existing life insurance". 

The primary market is the original sale of the life insurance policy. Life insurance is purchased for estate protection, income protection, key-man coverage, buy-sell agreements, and a variety of other reasons. Over time, as the original need for a life insurance policy changes, moving that policy into the secondary market stage may become prudent. 

When a policy owner decides to take their life insurance policy to the secondary market there are a few key considerations:
1) An application must be completed that includes a HIPAA authorization among other required forms.
2)The more complete medical history that is obtained, the more likely an offer is; and it is more likely that offer will be higher.
3) This process takes time; even through the LS Hub partially-automated and scalable back-office (that provides industry leading speed), medical facilities still take time to retrieve records.
4) There is NO OBLIGATION to sell the life insurance policy; the policy owner must accept an offer and go through the closing process.
5) There is NO COST to apply in the secondary market; the life settlement broker will cover all costs and transaction management workload/expenses.
6) While this course will go into more depth about the entire life settlement process, a secondary market life settlement transaction is complete when closing contracts are signed and the ownership & beneficiary designations are changed at the life insurance carrier to reflect the new policy owner (investor / buyer). 

The secondary market life settlement opportunity is the most prevalent. This is where policy owners and financial professionals with clients that are selling their policy operate. Once a secondary market transaction is complete the next stage a life insurance policy can move into is the tertiary market. While this is not common, some purchased policies may be sold again at a later date to a subsequent investor. In theory, like a house/car/boat or other asset, a life insurance policy can change hands several times.