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Understanding Life
Settlement Law

Life Settlements

Rules, Regs and Requirements

Legislation - what do you need to know?

Regardless of whether a policy is sold via a life settlement broker, direct to a provider or by auction on LifePolicyAuctions.com, it is important to familiarize yourself with the relevant legislation for both the issue state at the time of the policy’s issue, and the current legislation for the seller’s (policy owner’s) state.

Not all states are equal when it comes to life settlement regulations

The majority of states regulate life settlements to some extent, with a few having no regulations or licensing requirements as of February 2025.

Information is correct as of February 2025

Unregulated states:

Alabama, District of Columbia, Missouri, South Carolina, South Dakota and Wyoming currently have no specific life settlement regulations although all, with the exception of Alabama, cover them within their securities regulations.

Michigan and New Mexico regulate viatical settlements only.

Michigan - regulations apply if the insured is certified as terminally ill as defined by the federal regulations

(US code: 26 USC § 101(g)(4)(A)).

New Mexico - regulations apply if the insured is certified as either terminally and/or chronically ill:

  • Terminally ill as defined by federal regulation
    (US code: 26 USC § 101(g)(4)(A))
  • Chronically ill as defined by federal regulation
    (US code: 26 U.S. Code § 7702B(c)(2)

Know what is regulated, and how.

Regulations can include, but are not limited to:

Waiting period - the length of time that the life insurance policy must have been in force before it can be sold.

Reasonable payments - minimum purchase price to be paid to viators/sellers as set by each state’s guidelines. This is often a percentage of the death benefit value, depending on the insured’s life expectancy.

Insurable interest - applies when a policy is first issued but may, in some states, also be applicable when an ownership transfer takes place.

Rescission period - this varies by state and sets out how much time a policy owner has to change their mind about selling their policy - this is usually applicable either from the date on which the contract is executed by all parties or after the life settlement proceeds have been paid to the seller.

Licensing:

Both life settlement providers and life settlement brokers are required to be licensed in all life settlement regulated states.

For a life settlement to take place it is not a requirement to use a life settlement broker, however in regulated states the purchaser of the life insurance policy, from its original owner, must be a life settlement provider licensed in the seller’s state.

Policies listed for sale on LifePolicyAuctions.com will only be visible to providers who have the correct license for the seller’s state.

A judge holds a gavel to the block in one hand and rests his other hand on a book.

Where to go for guidance:

Full information and advice on how a state regulates life insurance and life settlements can be obtained from:

  • the state’s department of insurance.
  • the relevant state statutory code and administrative code of regulations.
  • the National Association of Insurance Commissioners (NAIC).

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