What Is a Retained Death Benefit?

A Retained Death Benefit (RDB) is a specialized life settlement option that allows a policyholder to sell their life insurance policy to a third-party buyer in exchange for an immediate lump-sum cash payout, while still retaining a portion of the death benefit for their chosen beneficiaries. This arrangement strikes a valuable balance between present financial needs and future legacy planning.

Unlike a traditional life settlement—where the entire policy is sold and the seller relinquishes all future death benefit rights—a retained death benefit arrangement gives policyholders the opportunity to unlock some of their policy’s value without giving up the ability to provide for loved ones after they’re gone.

This option has become increasingly attractive for individuals who may no longer need the full face value of their policy, whose financial priorities have shifted, or who want to reduce or eliminate the cost of ongoing premium payments but still want to leave behind something meaningful for their heirs. It is especially well-suited for those who face high healthcare costs, long-term care needs, or other large expenses in retirement.

Why Is It Important?

For many seniors, a life insurance policy represents one of their largest untapped financial assets. However, if the premiums have become unaffordable, or if the original purpose of the policy—such as income replacement for a spouse or dependent—no longer applies, continuing to pay for the policy may no longer make sense.

That said, fully surrendering or selling the policy could feel too final or might leave family members without any form of support upon the insured’s death. A Retained Death Benefit offers a compromise: you receive an immediate financial boost, and your loved ones still receive a portion of the policy’s value down the road.

Key Features of a Retained Death Benefit Arrangement

A Retained Death Benefit (RDB) arrangement offers a unique, flexible way for policyholders to unlock the value of their life insurance while still preserving a legacy for loved ones. Below are the core features that make this strategy appealing to many seniors and their families:

✅ Partial Sale of the Policy – Maintain a Portion of Your Legacy

Unlike a traditional life settlement where the entire policy is sold, an RDB arrangement allows you to retain a contractually agreed-upon share of the death benefit—typically between 10% and 30%, though higher percentages may be available depending on the policy and investor interest.

This means your life insurance policy becomes a shared asset: the institutional buyer receives their portion of the death benefit upon your passing, and your designated beneficiaries continue to receive a meaningful payout—all while you access immediate financial support today.

✅ Lump-Sum Cash Payment – Immediate Funds When You Need Them Most

In exchange for selling a portion of the policy, you receive a taxable or tax-advantaged lump-sum cash payment at the time of the transaction. This money is yours to use however you see fit:

  • Cover out-of-pocket medical expenses or long-term care

  • Pay down high-interest debt

  • Supplement your retirement income

  • Fund travel, family support, or home improvements

For many policyholders, this provides critical liquidity without resorting to loans or dipping into savings or retirement accounts.

✅ No More Premium Payments – Relief from Ongoing Costs

One of the biggest financial advantages of an RDB arrangement is that the investor or buyer takes over the responsibility of all future premium payments on the policy.

That means you’re no longer required to fund a policy that may no longer meet your needs—offering immediate budget relief and peace of mind. Whether your premiums are modest or burdensome, eliminating them can dramatically improve your monthly cash flow.

✅ Beneficiaries Still Receive a Payout – Preserve Part of Your Original Intention

Even after the transaction is complete, your loved ones still receive a payout from your life insurance policy. The retained portion of the death benefit is paid directly by the insurance carrier to your named beneficiaries—not through the investor or broker—ensuring transparency and security in the distribution process.

This makes RDB arrangements ideal for those who want to continue supporting:

  • Spouses or partners

  • Children or grandchildren

  • Charitable causes or religious institutions

  • Funeral or final expenses

You get the financial support you need today, while still honoring the purpose for which the policy was originally purchased.

Why Consider a Retained Death Benefit?

  • 🏦 Access Immediate Funds: Get cash without forfeiting your entire death benefit.

  • 💼 Maintain a Legacy: Leave money for heirs, even if you no longer need full coverage.

  • 🛑 Eliminate Premium Burden: No more out-of-pocket costs to keep the policy active.

  • 🧘 Financial Flexibility: Use the cash for medical care, long-term support, or simply to improve your quality of life.

Is a Retained Death Benefit Right for You?

Deciding what to do with your life insurance policy is a deeply personal financial choice—one that affects both your immediate needs and your lasting legacy. If you’re considering a life settlement but aren’t comfortable parting with the entire death benefit, a Retained Death Benefit (RDB) arrangement could offer the best of both worlds.

An RDB allows you to unlock immediate cash from your life insurance policy while still preserving a meaningful payout for your beneficiaries. This makes it an ideal solution for individuals who:

  • Want to access funds for retirement, healthcare, debt reduction, or other pressing expenses

  • No longer need the full coverage of their existing policy

  • Are struggling to keep up with costly premium payments

  • Still want to leave something behind for a spouse, children, grandchildren, or a favorite charity

Rather than letting the policy lapse or surrendering it for minimal value, an RDB ensures that your policy continues to serve a purpose—both for you and those you care about most.

A Customized Solution, Tailored to Your Needs

At Summit Life Settlements, we understand that no two policyholders are alike. That’s why we take a personalized, transparent approach to every retained death benefit arrangement. Our experienced brokers will work closely to guide you through the complexities of the Life Settlement Market to:

  • Determine your eligibility based on policy type, face value, age, and health status

  • Calculate the optimal balance between the cash payout and the retained benefit

  • Compare offers from multiple licensed buyers to ensure you receive the most favorable terms

  • Clearly explain the structure and impact of your options, including tax considerations and timing

Our goal is simple: maximize the value of your life insurance while helping you preserve your legacy. With an RDB, you’re not forced to choose between present-day security and future support for your loved ones—you can have both.

A Retained Death Benefit (RDB) is a powerful option available to life insurance policyholders who are considering selling their policy but want to ensure their loved ones still receive some financial protection after they pass. In an RDB arrangement, the policyholder sells a portion of their life insurance policy to a licensed buyer—often an institutional investor—but retains a contractually guaranteed share of the death benefit for one or more designated beneficiaries.

Unlike a full life settlement, where the entire policy is sold and beneficiaries no longer receive any death benefit, an RDB provides a hybrid solution. It allows you to access a lump-sum cash payment now, while still leaving behind a financial legacy for family members, a spouse, children, grandchildren, or even a charitable cause.

Here’s how it works:
Once the transaction is complete, the buyer assumes full responsibility for all future premium payments and becomes the primary beneficiary of the sold portion of the death benefit. However, your beneficiaries will still receive the retained portion, paid directly by the insurance carrier upon your passing. This arrangement offers a meaningful compromise between immediate financial relief and long-term planning.

When you choose to sell your life insurance policy through a Retained Death Benefit (RDB) arrangement, you’re not giving up the entire value of your policy. Instead, you’re entering into a strategic agreement that allows you to unlock a portion of your policy’s value now—while still reserving a financial benefit for your loved ones in the future.

In a typical RDB transaction, a portion of your policy’s death benefit is contractually preserved for your named beneficiaries. This means that even though a share of your policy is sold to a licensed life settlement provider or institutional investor—who becomes responsible for future premium payments and receives the remaining benefit—your beneficiaries will still receive a guaranteed payout from the retained portion when you pass away.

For example, if your policy has a $1,000,000 face value, you might sell $700,000 of that to an investor, while retaining $300,000 for your family or estate. Upon your death, the investor receives their share, but your heirs will receive the $300,000 directly from the insurance company, just as they would have under the original policy—without having to worry about premiums or administrative burdens.

This arrangement is particularly valuable for individuals who no longer need the full face amount of their life insurance coverage—perhaps because children are grown, mortgage debts are paid off, or estate needs have changed—but who still want to leave behind a meaningful legacy or cover final expenses for their family.

Ultimately, an RDB structure combines the immediate financial benefit of a life settlement with the emotional and practical peace of mind of continuing to provide for loved ones. It’s a thoughtful way to maximize the utility of your policy, offering flexibility, liquidity, and lasting impact.

Policyholders looking for immediate cash relief while still wanting to provide some financial safety net for their beneficiaries can benefit from a retained death benefit. It offers a balanced approach, meeting current financial needs without fully sacrificing future security for loved ones.

Typically, choosing a retained death benefit won’t involve additional costs; however, the overall offer you receive for your policy might be lower compared to selling without this benefit, as part of the death benefit is withheld from the investor.

The amount of the retained death benefit varies based on negotiations with the buyer and the specifics of your life insurance policy. It’s important to consult with a broker to understand the best options available and determine a suitable arrangement.

Policies regarding beneficiary changes can vary, so it’s crucial to review the terms of your life settlement agreement. Generally, the retained portion of the benefit allows some flexibility, but clarifying these details with your broker is essential. Additionally, it’s important to keep your beneficiaries informed of any changes made to your policy.

Deciding on whether or not a retained death benefit is the best option for you depends on your individual circumstances and needs. It’s important to weigh the pros and cons, consult with a broker, and carefully review all details of the life settlement agreement before making a decision. Ultimately, this arrangement can provide immediate financial relief while still offering some future security for loved ones. However, it may not be suitable for everyone, so it’s crucial to consider all factors before proceeding.

Yes, there are alternative options available for selling your life insurance policy, such as a full cash payout or a life settlement with no retained death benefit. It’s important to thoroughly explore and compare all options to determine the best fit for your specific situation and goals. Don’t hesitate to seek guidance from a broker or financial advisor to make an informed decision. Additionally, it’s essential to carefully consider any tax implications that may arise from different life settlement arrangements.

There are many resources available for learning more about retained death benefits and life settlements. You can consult with a broker or financial advisor, research online, attend seminars or conferences on the topic, or even join support groups for individuals who have gone through similar experiences. It’s important to stay informed and educated before making any decisions that may impact your financial future and that of your loved ones. Ultimately, understanding all aspects of retained death benefits and life settlements can help you make the best choice for your unique situation.