How to Sell Your Life Insurance Policy [2024]

There are many reasons why someone may want to sell their life insurance policy. If you want to cash out quickly, you found the right guide for answers.

Before you start, it’s essential to know the market before you sell your life insurance policy for cash. Understanding who you are selling to will help you stay alert for scammers. Also, you might find it difficult to cash out your term life insurance if you’re not a senior and have a low-value policy.

If you aren’t eligible for a sizeable payout from a broker, you still have other options. Keep reading to learn more about selling your life insurance. 

Use our free tool if you’re ready to connect with someone to help you sell your life insurance policy. Enter your ZIP code to find a local life settlement broker or insurance settlement company in your area.  

How to Sell Your Life Insurance Policy Online

Buyers looking to reap the reward of a death benefit are looking for sellers who are at least 65 years old. These sellers may also have a limited life expectancy and a high-value life insurance policy. 

To find your buyer, you will need to go through a broker or a life insurance settlement company. Keep reading to learn more about the best company to sell your life insurance policy to and where to find it.  

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Understanding Life Settlements 

When someone sells their life insurance policy, they carry out a life settlement. This sale is sometimes called a “senior settlement” because the typical buyer is an investor interested in your death benefit. 

A life settlement is when you sell a life insurance policy to a third party for a one-time cash payment. According to the Financial Industry Regulatory Authority (FINRA), a government-recognized non-profit that oversees brokers, the sale proceeds are more than the policy’s cash surrender value but less than the death benefit. 

Another type of life insurance payout is called a viatical settlement. This situation is an arrangement between someone who is terminally ill and a third party for the purchase of a life insurance policy for less than its mature value. 

If your insurance needs have changed or you would otherwise surrender your policies, a life settlement is a great option. However, if you’re looking for fast cash, it may not be the recommended action for your needs. 

Life Settlement Companies 

Life settlements have unintended consequences, and it’s easy to get scammed or shorted in a deal. You want to make sure you find a trusted source to sell a life insurance policy to. 

If you choose to go through a broker, your state’s insurance department might have a list of licensed professionals that can help you sell a life insurance policy for cash. You may also find a life settlement broker at a financial consulting agency or insurance agency in your town. 

Some of the most trusted life insurance companies and brokers are listed below: 

• Abacus Life Settlements 
• Coventry Direct
• Habersham Funding
• Institutional Life Services 
• Harbor Life Settlements 

Some areas in your life insurance policy that could affect its price or sale include your premium rate, policy terms, and the accreditation of the issuing company. 

Your policy’s value amount will be an essential piece to your final sale proceeds. A high-value policy is likely to sell faster than a low-value policy. 

Remember, you’re shopping for a settlement just as you were shopping for the initial life insurance policy. Get a few quotes, and don’t take the first offer you receive without considering all your options. 

Alternatives to Life Settlements 

There are other options to selling your life insurance, depending on your needs. Two options that are immediately at your fingertips are using the policy’s cash value and/or accelerating your policy’s death benefits provision. 

Borrowing money against your life insurance policy is a quick way to get money fast if you aren’t sure about selling. Some whole life insurance plans have an investment addition that allows you to take out a loan on the cash value. Often, taking a loan from your policy will result in high-interest repayments. 

There are also policy options in which you can keep living with life insurance benefits. Accelerating your death benefits may be subject to fees and taxes that would undervalue your policy amount. 

Another option is to surrender your policy. This alternative to selling your life insurance may be riddled with fees and may not result in the most value, but it offers fast cash. 

Advice for Selling Your Life Insurance 

No matter how you get rid of your policy, you can count on losing money. 

In a life settlement, you’re likely not going to receive what you agreed upon because you need to pay that third-party negotiator. The proceeds from your sale are subject to taxes and possible fees if you use a company or broker to sell your policy. 

Creditors also have a right to the proceeds for your sale in some states. For tax and legal information, it’s best to speak with a financial or tax advisor. 

In some states, sellers have 15 days to change their minds, return the sale proceeds, and reinstate their life insurance policy. 

You should also be aware that your private information may be subject to third-party sharing after the sale. 

When should you sell your life insurance policy?

You can sell your life insurance policy with a life settlement (or viatical settlement) if you no longer need it or can’t afford it. Your eligibility for a life settlement will depend on the type of policy, face value of the policy, policy owner’s age, and policy’s age. (For more information, read our “Life Insurance Face Value (Terms Explained)“).

Can you sell your life insurance policy? If you don’t need your life insurance policy anymore, it may be possible for you to sell the policy. While selling your life insurance policy may sound appealing, the process can be expensive and complicated, which may make alternatives more practical than a settlement. You should research life settlements thoroughly and consider meeting with a financial advisor before making any decisions.

Enter your ZIP code into our free quote comparison tool above to get life insurance quotes from companies near you.

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Is it safe to sell my life insurance policy?

It is safe to sell your life insurance policy through a life settlement as long as you meet proper requirements. A life settlement is a right granted by the Supreme Court since the Grigsby v. Russell case in 1911.

The factors that determine eligibility for a life settlement include the type of policy, value of the policy, age of the policy owner, and policy age. Your policy must be a whole, convertible term, variable, or universal life insurance policy with a face value of at least $50,000-$100,000.

Depending on your state’s waiting period, you must have owned the policy for at least 2-5 years. In addition, the older the policy owner, the more likely they are to qualify for a life settlement.

Can you sell your life insurance policy if you are under 65? You may qualify for a life settlement while under 65, but it is more likely that you will be eligible if you are over 65.

Can you sell your life insurance policy if you have only had it for one year? Each state has a waiting period that determines how long you must have owned a life insurance policy before selling it. Waiting periods typically range between two and five years.

Can you sell your life insurance policy if you are not terminal? Yes, you can sell your life insurance policy if you are not terminal. However, you may receive more in a settlement if you are terminal.

Can you sell your term life insurance policy for cash? This depends on the terms of your policy. If your term life insurance policy is convertible to a whole life insurance policy, then you can sell it for cash.

Can you sell part of your life insurance policy? In general, you won’t be able to sell only part of your policy.

How can you sell your life insurance policy?

A life settlement is sometimes called a viatical settlement. It occurs when you are surrendering your life insurance policy to a third party for cash. Brokers and settlement companies are most likely to buy a life insurance policy. The third party then takes over the premium payments and receives the death benefit when you pass away.

You will have to meet the requirements listed above, but they may vary slightly based on your location and the third party you work with. For example, brokers and settlement companies are likely to offer you more if you are older or if your health is declining.

Should I sell my life insurance policy?

Selling your life insurance policy is a good option only for a few specific reasons. Suppose your beneficiaries rely on the death benefit to remain financially stable after your passing. In that case, you should keep the policy, but if your beneficiaries are no longer in need of the death benefit, selling may be worth it.

If you have a permanent life insurance policy that you can’t afford to keep, you may want to consider a life settlement. However, if you have term life insurance that you can’t afford, it may be easier to cancel the policy or let it lapse.

Finally, if you have enough money to self-insure, you could consider settling. If you’ve built up enough savings to support your beneficiaries after you pass, you may want to settle your life insurance policy so that you don’t have to keep paying for it.

With that in mind, a life settlement can be more expensive and complicated than most people think. It may be challenging to find a suitable offer since buyers want to make sure they’ll make a profit. In many cases, you may only receive 20% to 25% of the face value of your policy.

In addition to a low settlement, you may have to pay a fee of up to 30% of your payment to a broker. The income may also be taxable or affect eligibility for financial assistance.

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What are the alternatives to selling my life insurance policy?

Most people find that alternatives to a life settlement are more manageable and sometimes more profitable than selling their life insurance policy. If you’re having difficulty affording your life insurance policy, there are ways to lower or get out of your premiums that don’t involve going through a lengthy selling process.

Some life insurance companies will allow policyholders to lower their coverage amounts, reducing their premiums. If this isn’t an option with your provider, you may cancel or surrender your policy. Term life insurance policies can be canceled or allowed to lapse without penalties. Learn more about how to cancel your life insurance policy.

If you have a whole life insurance policy, the policy can be surrendered (usually with fees) to receive some of its cash value. You may also borrow against the cash value or use it to pay the premiums if you don’t want to surrender the policy.

Many life insurance policies also include an accelerated death benefit (ADB) rider, which allows some policyholders to receive a portion of their death benefit before they pass away. In most cases, this is for individuals who are diagnosed with a terminal illness, but you can check the requirements with your life insurance company.

If none of the above options work for you, you could also use a 1035 exchange to trade your life insurance policy for a more affordable whole life policy or an annuity.

If you’re searching for more affordable life insurance rates, enter your ZIP code into our free quote comparison tool below to compare policies from companies in your area.

Case Studies: Selling Life Insurance Policies

Case Study 1: The Senior Seller

Mr. Johnson, a 70-year-old retiree, found himself with a surplus life insurance policy that he no longer needed. He decided to explore the option of selling his policy for cash. With the help of a reputable life settlement broker, he connected with a buyer who was interested in purchasing his high-value policy.

After careful evaluation, Mr. Johnson successfully sold his policy, receiving a lump sum payment that provided him with financial flexibility in his retirement years.

Case Study 2: The Financially Strained Family

The Smith family was facing a significant amount of debt and struggling to make ends meet. Mrs. Smith, the policyholder, had a term life insurance policy with a low cash value. Recognizing the need for immediate funds, the family decided to sell the policy.

They enlisted the services of a life settlement company that specializes in purchasing policies from individuals in challenging financial situations. The sale of the policy provided the Smith family with much-needed cash to alleviate their debt burden and regain financial stability.

Case Study 3: The Unexpected Health Crisis

Ms. Martinez, a 55-year-old professional, was diagnosed with a terminal illness that required expensive medical treatments. She had a whole life insurance policy but lacked the financial means to continue paying the premiums. Instead of surrendering the policy or letting it lapse, Ms. Martinez opted to explore a viatical settlement.

Through a trusted life settlement broker, she found a buyer willing to purchase her policy for a lump sum payment. This allowed her to cover her medical expenses and focus on her health without the burden of ongoing insurance premiums.

Selling Life Insurance: The Bottom Line 

Whether you are 65 years and up or someone facing overwhelming medical bills, life insurance settlements are fast ways to get cash from your life insurance policy. However, this money comes with a laundry list of warnings. When you’re shopping around for the best price, make sure you’re also speaking with tax advisors so that you’re not surprised by hidden charges later on. 

If you think selling a life insurance policy is your next move, let us help you. Enter your ZIP code now to get in touch with a life settlement expert. 

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