Life Settlement

It sounds like a mental health retreat for estate lawyers who have suffered an on-the-job meltdown. ("Here at Life Settlement, the only trust you need to worry about is trust in yourself.")

But the term actually applies to insurance. It refers to the owner of a life insurance policy selling it to a third party for cash.

Often, life insurance policies have what's called a "cash surrender value." This figure represents the amount the insurance company will pay you if you voluntarily cancel the policy. It's kind of like selling the policy back to the insurer.

Meanwhile, life insurance carries a death benefit (that's the whole point of the exercise). It represents the amount your beneficiaries collect when you die.

A life settlement involves selling your policy to a third party for more than the cash surrender value but less than the death benefit. You get more money than you would have gotten if you had simply sold the policy back to the company. Meanwhile, the person buying your policy will make a profit once you...well, once the policy "reaches maturity" (i.e., you croak).

The surrender value for your policy is $500,000. It carries a death benefit of $1 million. You enter a life settlement with your creepy neighbor for $750,000. The neighbor writes you a check now for $750,000. When you eventually die, they collect the $1 million benefit.

A life settlement allows you to get a chunk of cash now...so you can pay for your medical expenses, or order a mail-order spouse. The downside is that your beneficiaries no longer get anything from the policy.