Life insurance settlements are a relatively new twist by the life insurance industry as a way to add additional flexibility to ordinary life insurance policies. In the past when a policy holder's life situation made his or her whole life policy out of date, it could be surrendered for its accumulated cash values. Those are the values stipulated in the policy itself plus any accrued dividends, interest etc.

Now if you want to surrender your life insurance policy for its cash value there is another range of options provided by a secondary market in life insurance policies, compared to just cashing in the whole life insurance policy directly with the company that sold it to him in the first place.

Now a life insurance policy holder has the option of selling their unwanted life insurance policy to a third party company and invest the resulting life insurance settlement in other investment opportunities that are more in line with their financial plan.

In other words it is now possible to sell your whole life insurance policy to the highest bidder and take a cash settlement, called the life settlement, and use it for whatever purpose that fits your circumstances.

However, before going down this path I recommend that you consider your alternatives. Think about it, there would be no such thing as a life settlement industry if there wasn't a ton of money to be made switching old policies for new - which is the goal of the industry after all.

They are not in the life settlement business for their health or your profit. In fact it wasn't very many years ago when people who recommended that you switch an old policy with a new one were actually breaking the insurance laws in their states.

Buying life insurance is just about the most unselfish thing anyone can do. Having some advisor tell you that you don't need it any more is often an irresistible opportunity to get back to thinking of themselves. Surrendering a life insurance policy, getting a bunch of money back for themselves and buying another one with some of the proceeds is an offer they don't want to refuse.

However, the need for life insurance never goes away. The assets and people you are protecting and the reasons you should want to protect them change, but it's still there. The people suggesting that you don't need the insurance anymore because the specific reason you bought it in the first place has changed are not looking out for you, they are looking out for them and their commission.

Before you seriously consider a life insurance settlement proposal contact the company that sold you the insurance in the first place. Go to the company's web site, not that of the agent - since they may have very different objectives, and see what options are available without generating a huge new commission for the people recommending that you exchange your old, according to them "outdated" life insurance policy for a new one.

Think about it, don't you imagine that State Farm, New York Life, Prudential and all the other well established companies have creative ways to adjust the billions and billions of life insurance policies they have sold to meet situations like this? For them keeping the life insurance policies on the books is the single most profitable thing they can do.

So talk to people at the home office who are motivated to make the adjustments necessary in the whole life policies you already have. Then seek the input of knowledgeable people you trust, maybe members of your business to business peer group, who do not have a financial stake in the decision you make.