Insurance settlement loans are usually applicable in cases where a plaintiff is awaiting an insurance settlement for some personal injury or loss. For instance, in cases of natural disasters, organizations like the U.S. Small Business Administration award financial assistance to people whose property has been devastated.

Insurance claim procedures can be a drawn-out process, especially where an element of doubt or ambiguity exists about the claim. The recipient may have to wait several years before the claim actually materializes into hard cash. In such cases, loans to tide the claimant over are generally obtainable.

The term insurance settlement loan is sometimes associated with the practice of turning eventual life insurance settlements into real and present money. This is also known as life settlement