Quick Answer: Yes — U.S. law allows policyholders to sell their life insurance policy for cash through a life settlement or viatical settlement. Sellers typically receive between 10% and 25% of the policy’s face value, which is significantly more than the cash surrender value most insurers offer. Eligibility depends on age (usually 65+), health, and minimum policy value ($100,000+).
Recently, several surveys have found that many policyholders give up an estimated $200 billion in life insurance benefits every year in the United States. According to the Life Insurance Settlement Association (LISA), 55% of seniors aged 65 and older are still unaware that selling their policy is an option.
This goes to show that, while many have heard about selling their life insurance policies, few policyholders understand how it works. This article provides guidelines on how to sell your policy including all the requirements and steps involved.
Wondering If You Can Sell Your Life Insurance Policy?
The answer is yes, you can sell your life insurance policy for cash. U.S. life insurance law provides policyholders with the option of surrendering their life insurance policy or selling it, provided they meet the requirements and follow the due process. As a policyholder, selling your life insurance policy means you are trading the policy with all its associated benefits to a third party in exchange for an agreed amount of money. The buyer automatically becomes the owner of the policy, takes over the premium payment, and is entitled to all the benefits from the coverage.
Sell Your Life Insurance Policy to Avoid Coverage Lapse
Due to age, income loss, health challenges, disability, and other factors, many policyholders find it difficult to continue paying premiums in order to keep their policy active. Policyholders are typically given a grace period of 30 days if they fail to pay premiums on their policies in due time.
If, after the grace period, you are still unable to pay the premium, your life insurance policy will lapse. The word “lapse” means you are no longer entitled to any coverage from the policy. You will forfeit the death benefit meant for your beneficiaries if you died. So, to avoid losing out on your policy, you may sell your life insurance and make money from it via either a “life settlement” or “viatical settlement” option.
Who Might Qualify for Selling Life Insurance Policy?
Different factors determine one’s eligibility to sell a life insurance policy. To start with, the policy must have a value worth selling to a third party. Your age and health will also play a role, and this will largely determine the available avenue through which you can sell the policy.
Selling your policy for cash may make sense in any of the following scenarios:
- You can no longer continue with the premium payments due to financial constraints.
- You have medical expenses or emergencies which require urgent cash.
- You have other more important things for the funds such as retirement.
- You no longer have beneficiaries for your policy.
- You need the funds now more than your beneficiaries will need it in the future.
Life vs Viatical Settlement
There are two options for selling life insurance: life settlement and viatical settlement. Here are the steps and benefits of both:
Life Settlement: Life settlement is for seniors (those aged 65 and above) who wish to sell their life insurance policies when it is no longer necessary to keep them active. At this stage, many people prioritize supplementing their retirement savings with the payout from the policy and free themselves from the monthly premium payment. If you meet the age requirement and your life insurance policy has the minimum required value, you can consider this option. Keep in mind that selling your policy via life settlement will require paying taxes on some of the proceeds.
Viatical Settlement: Viatical settlement is designed for policyholders who need to sell their policy for medical reasons. It is for those with a terminal illness and have two years or less to live. The critical health issue may mean that they need funds to settle medical bills and avoid leaving their relatives in debt. In this case, they can sell their life insurance policy to handle these finances. When you sell your policy via viatical settlement as a result of a health issue, the payout is usually tax-free.
Before people can sell their policies via viatical settlement, they will need a doctor’s report as proof of their critical condition. The tax rules governing viatical settlement can sometimes be complex and can quickly change from year to year. Therefore, it is best to consult a financial advisor for clarification on what the law says in your state.
Policy Value
The value of your policy also matters when selling a life insurance policy. Generally speaking, the policy must have a minimum death benefit of $100,000. The higher the value, the more attractive it is to the investors. What you will eventually get as a payout will usually be higher than cash value and less than the death benefit amount. While any type of life insurance policy can be sold, some are more attractive and have higher values.
For instance, policies that build up cash value, such as universal life products, may have a higher market value than term life insurance. Also, convertible term life products with the option to convert to permanent insurance also stand a better chance than other term life policies. Of course, the policy’s premium rate, cash value amount, and whether there are existing loans against the policy are other factors that will determine the payout you can expect.
How Much Will I Get for Selling My Life Insurance Policy?
One good thing about life insurance policy sale is that it is open for negotiation. On average, people receive 10% to 25% of the policy’s face value depending on the viatical or settlement company you are dealing with. According to LISA’s 2024 data, the average settlement delivered more than 6.5 times the cash surrender value — often $511 million more than policyholders would have received by surrendering their policies.
How to Sell Your Life Insurance Policy
Because each situation is different and there are many factors that determine the amount you can expect, it’s always best to work with a professional when selling. Your policy will be valued based on certain criteria including your age, health, and the remaining portion of time in which the policy will be active.
As we mentioned earlier, the cash payment you will receive will usually be larger than the policy’s cash surrender value but less than the death benefit amount. The timeline for the whole process usually takes months. Depending on the company you are dealing with, you may be paid upfront before the entire contract is finalized.
Before you begin making plans to sell your life insurance policy, you need to understand the pros and cons involved. One of the benefits is that you will be paid a cash lump sum (usually upfront), which you could use as you see fit. This also marks the end of premium payments on the policy, which means you have one fewer expense in your personal finances. The downside is that you will forfeit coverage from the policy and the death benefit payout. You can sell your life insurance policy with the help of life settlement brokers or by directly reaching out to life settlement providers.
Life Settlement Broker
A life settlement broker is a professional who will work as your representative in a life insurance policy purchase. The negotiation and every other step in the trading process will be done by the broker on your behalf. He or she must be licensed in your state of residency to qualify to represent you. Life settlement brokers are usually paid on a commission basis.
Life Settlement Provider
Life settlement providers, on the other hand, are the companies that buy life insurance policies, usually on the secondary market.
How LifeQuote Can Help
Selling a life insurance policy involves several terms and conditions which include age, health, and the tax rules governing life or viatical settlements in your state. These are complex aspects of life insurance sales which cannot be approached with a one-size-fits-all method, especially as there are varying life insurance laws depending on your state.
Here at LifeQuote, we have a team of highly experienced professionals with a vast knowledge of the insurance industry. For decades, we have been helping our clients meet their various life insurance needs. To better understand the process of selling your life insurance policy, or if you are considering replacing an existing policy with a more affordable option, contact us.
Frequently Asked Questions
Sellers typically receive 10% to 25% of their policy’s face value, though some cases yield more. According to LISA, the average 2024 settlement paid sellers more than 6.5 times the cash surrender value their insurer would have offered — making a life settlement far more lucrative than surrendering or lapsing a policy.
Whole life, universal life, and convertible term life policies are all eligible. Standard non-convertible term policies rarely qualify because buyers can’t extend coverage. Policies with a death benefit of at least $100,000 and owned by someone aged 65 or older attract the most buyers.
A life settlement is for seniors (typically 65+) who want to sell a policy they no longer need. A viatical settlement is for policyholders with a terminal illness — usually a life expectancy of two years or less. Viatical settlement proceeds may be tax-free, while life settlement proceeds are generally taxable above your cost basis.
Life settlements are legal and regulated in most states. LISA reports that 90% of the U.S. population lives in states with comprehensive life settlement laws. Requirements vary by state, including waiting periods (typically 2–5 years after policy purchase) and licensing requirements for buyers and brokers.
Most life settlement buyers require the insured to be at least 65 years old. Younger policyholders may still qualify if they have a terminal or chronic illness — in which case it’s treated as a viatical settlement rather than a standard life settlement.
Life settlement proceeds are generally taxable. The portion above your cost basis (total premiums paid) is subject to income tax, and amounts above the policy’s cash surrender value may be taxed at capital gains rates. Viatical settlements for terminal illness are typically tax-free. Consult a tax advisor before completing any transaction.
References
Harbor Life Settlements. “2025 Life Insurance and Life Settlement Statistics to Know.” harborlifesettlements.com, 2025.
Windsor Life Settlements. “LISA Survey: 55% of Seniors Unaware of Life Settlement Option.” windsorlifesettlements.com, 2024.
Life Insurance Settlement Association (LISA). “2024 Member’s Annual Market Data Survey.” lisa.org, May 12, 2025.
Citizens Life Group. “Average Life Settlement Payout Amount.” citizenslifegroup.com, February 2025.