Can I sell my life insurance policy for cash?

Can I sell your life insurance policy and get paid cash?

Yes, you can sell your life insurance policy for cash through a process known as a “life settlement.” In a life settlement, you sell your policy to a third-party buyer in exchange for a lump sum of cash. This can be a great option if you no longer need the insurance coverage and could use the funds for other purposes.

When to Consider Selling Your Life Insurance Policy

Today, policyholders who no longer need or want their current life insurance coverage to have options other than just simply cashing out or canceling their plan. How do you know if a life settlement company would be interested in buying your policy? Here are some principles on who may be a good candidate.

Consider selling your life insurance policy when:

  • Your financial needs have changed.
  • Premium payments are becoming a burden.
  • Your term policy is about to expire.
  • Your health has deteriorated.
  • You need a lump sum of cash.
  • You have multiple policies and are over-insured.
  • You’re a senior or over 65.

How does a Life Settlement Work?

Eligibility Assessment:

First, you’ll need to determine if you qualify for a life settlement. Generally, seniors or individuals over the age of 65 tend to be better candidates because the value of their policies is often higher due to shorter life expectancies. Policies with a face value of $100,000 or more are also typically more attractive to buyers.

Seek Professional Guidance:

It’s highly recommended to work with a licensed life settlement broker like us or provider. They will help you navigate the process, assess the value of your policy, and connect you with potential buyers.

Policy Evaluation:

The buyer will evaluate your policy to determine its worth. They’ll consider factors like your age, health, the type of policy, and the premiums required to keep it in force.

Offer and Negotiation:

Once the evaluation is complete, the buyer will make an offer. You can negotiate the offer to ensure you’re getting the best deal possible.

Acceptance and Sale:

If you’re satisfied with the offer, you can accept it. The buyer will then take over the policy, paying you the agreed-upon lump sum. They will also become the new beneficiary.

Use of Proceeds:

You’re free to use the cash you receive from the sale for any purpose you wish, whether it’s to cover expenses, invest, or enjoy your retirement.

How the Value is Determined When Selling a Life Insurance Policy.

Calculating the value of a life insurance policy when you want to sell it can be a complex process, and it often involves several factors.

This is how the value of your life insurance policy is calculated when selling it:

  1. Face Value: The death benefit or face value of your policy plays a significant role. Policies with higher face values generally have higher settlement values.
  2. Policy Type: The type of policy you have, whether it’s term life or permanent life insurance, affects its value. Permanent policies tend to have higher settlement values due to their cash value component.
  3. Age and Health: Your age and health condition are critical. Older individuals or those with health issues may receive higher offers because their life expectancies are shorter.
  4. Premiums: The ongoing premium payments required to keep the policy in force are considered. Higher premiums may decrease the policy’s value.
  5. Policy Riders: Any additional riders or benefits attached to your policy can impact its value.
  6. Market Conditions: The current market for life settlements can influence offers. It’s a market-driven process, so economic conditions play a role.
  7. Provider/Buyer: The life settlement provider or buyer you work with can affect the offer you receive. Different companies may have varying criteria and policies.
  8. State Regulations: State laws and regulations can impact the process and value of a life settlement.
  9. Cash Surrender Value: The cash surrender value, which is the amount your insurance company would give you if you canceled the policy, is often a baseline for offers. Generally, you’ll receive more than the surrender value in a life settlement.

Keep in mind that every situation is unique, and the value of your policy will depend on a combination of these factors. It’s crucial to work with a licensed life settlement broker like us or provider who can evaluate your specific policy and circumstances to determine its fair market value.

How to Sell a Term Life Insurance Policy.

Selling a term life insurance policy is an option worth exploring if you find yourself in a situation where the coverage is no longer needed or if you’re looking to free up some cash.

Here’s a bit more detail on how this works:

Term life insurance policies provide coverage for a specific duration, like 10, 20, or 30 years. They’re excellent for providing financial protection during those critical years when your family may depend on your income. However, as life goes on, your financial needs can change.

If you’re in a position where the term policy is no longer serving its intended purpose, you have a couple of avenues to consider.

First, check if your policy includes a conversion option. This allows you to convert your term policy into a permanent one without needing to undergo a medical exam. Permanent policies tend to have higher values in the secondary market due to their cash value component.

If conversion isn’t an option or doesn’t align with your goals, you can explore selling your term policy through a life settlement. It’s important to understand that term policies typically have lower market values compared to permanent policies because they don’t accumulate cash value over time. The value you receive for your term policy in a life settlement is influenced by factors such as your age, health, face value of the policy, and the premiums required to maintain it.

Navigating the process of selling a life insurance policy, whether term or permanent, can be intricate. That’s why it’s highly recommended to work with a licensed life settlement broker or provider. They have the expertise to assess your specific situation, determine the fair market value of your policy, and connect you with potential buyers. This professional guidance ensures you make informed decisions regarding your life insurance policy based on your individual needs and financial goals.

Pros & Cons of Selling Your Life Policy

Pros of a Life Settlement:

  1. Immediate Cash Infusion: Life settlements provide policyholders with a lump sum of cash, which can be used for various financial needs, such as paying off debts, covering medical expenses, or investing in retirement.
  2. No More Premium Payments: When you sell your life insurance policy through a life settlement, you no longer need to pay the ongoing premiums, which can be a significant financial relief, especially for seniors on fixed incomes.
  3. Financial Flexibility: Life settlements offer financial flexibility and options. You can use the funds as you see fit, providing the freedom to address your changing financial priorities.
  4. Opportunity to Address Changing Circumstances: Life settlements are ideal for individuals whose financial needs or goals have evolved since they purchased their life insurance policies. It allows you to adapt to your current circumstances.

Cons of a Life Settlement:

  1. Loss of Death Benefit: One of the most significant drawbacks is that you forfeit the death benefit of your life insurance policy. This means your beneficiaries will not receive a payout when you pass away.
  2. Tax Implications: There can be tax implications when you receive a lump sum from a life settlement. The amount you receive may be subject to income tax, so it’s essential to understand the potential tax liability.
  3. Potential Lower Payout: The amount you receive in a life settlement is typically less than the face value of your policy. The offer you get may be lower than your expectations.
  4. May Not Be Suitable for Everyone: Life settlements are not suitable for every policyholder. Eligibility criteria, such as age and health, can affect your ability to secure a favorable offer.
  5. Impact on Government Assistance: If you’re receiving government assistance programs, the funds from a life settlement can affect your eligibility for these programs, so it’s crucial to consider the impact on your benefits.


In the world of life insurance, life settlements offer a valuable option for policyholders whose needs have evolved over time. Whether you hold a term or permanent policy, exploring the potential value of your life insurance can be a pivotal step towards achieving your current financial goals.

As licensed life settlement brokers/providers, we’re here to guide you through this process. If you’re curious about the worth of your policy or ready to take the next step, don’t hesitate to reach out to us or complete our quote form for a personalized appraisal of you policies value.

Your financial future is important to us, and we’re committed to helping you make the most informed decisions. Get in touch today to discover the possibilities that await you.

Try our Life Settlement Calculator here.

Get a Quote
Get a Quote