Can I sell my life insurance policy, and how much is it worth?

What a life settlement actually is

A life settlement is the sale of an existing life insurance policy to a third-party buyer for a lump sum of cash. The buyer becomes the new owner and beneficiary and pays all future premiums. You receive the money with no restrictions on how it is used.

The alternative most people take by default is worse. Surrendering the policy returns it to the insurer for a fixed cash value set by the insurer. Letting it lapse returns nothing at all. Both leave real money behind, and thousands of policies are surrendered or lapsed every year that had substantial secondary-market value.

Who qualifies

• Adults 65 and older, or younger policyholders with significant health changes since the policy was issued.
• Policies with a face value of roughly $100,000 or more.
• Business owners in transition — selling, retiring, or restructuring — holding key-person or buy-sell coverage that no longer serves a purpose.
• Families whose original reason for the coverage has passed: the mortgage is paid, the children are grown, the business was sold.
• Anyone whose premiums have become a strain on retirement cash flow.

Which policies are eligible

Convertible term, universal life, whole life, variable life, and adjustable life policies are all commonly eligible. Group policies may be eligible depending on conversion rights.

What determines the offer

• The insured's age and current health, which drive the life expectancy estimate.
• The face value of the policy.
• The ongoing cost of premiums the buyer will have to carry.
• The policy type and the financial strength of the issuing carrier.
• How many buyers are competing for it — which is the part you control.

The process, start to finish

• 1. Submit the policy details — coverage type, face value, and information about the insured.
• 2. Qualification and evaluation — specialists review the policy, age, health, and coverage to establish eligibility and an expected value range.
• 3. Competitive offers — licensed buyers evaluate the policy and submit bids.
• 4. Closing and funding — you accept an offer, funds are placed in escrow, ownership transfers, and you are paid. Premium obligations end.

Use a broker, not a single buyer

Going directly to one investor means accepting whatever that investor offers, with no reference point. A broker shops the policy to multiple licensed buyers at once, and that competition is usually the single largest factor in the final number.

Ask any party you work with whether they represent you or the buyer, how they are compensated, and how many buyers will actually see your policy.

The honest trade-offs

• Your beneficiaries no longer receive the death benefit. This only makes sense when the policy is no longer needed for income replacement or estate liquidity.
• Some or all of the proceeds may be taxable, depending on your cost basis, the surrender value, and how the policy is structured. Consult a tax advisor before closing.
• A payout can affect eligibility for need-based benefits such as Medicaid.
• You will be asked to release medical records as part of underwriting.