What option allows a whole life insurance policyowner to sell their policy for more than its cash value?

A life settlement contract is an arrangement where a policyowner sells their whole life insurance policy to a third party for a lump-sum payment that is typically greater than the cash value of the policy but less than its death benefit. This option is particularly attractive to policyowners who may no longer need the coverage, can no longer afford the premiums, or wish to access the policy's value for other financial needs.

In contrast, cash surrender involves terminating the policy for its cash value, which does not provide the potential for a higher payout than the cash value. A policy loan allows the policyowner to borrow against the cash value, but the payout upon surrender of the policy or in case of death ultimately does not exceed the policy’s death benefit. The understanding clause, if referenced, typically pertains to conditions of the policy rather than providing a mechanism for financial transactions. For those exploring options to obtain value from their life insurance policies beyond just the cash value, life settlement contracts present a viable and financially beneficial alternative.