How to Sell Your Life Insurance Policy for Cash

Most of the seniors I talk to have no idea there is an option called a life settlement that typically offers significantly more than insurance carriers will give you from surrendering the life insurance policy. They call me because their premiums went up again, or their kids are grown and the policy doesn't matter the way it used to, or they're sitting on a policy they took out twenty years ago and the insurance company quoted them a surrender check that felt insulting. Almost none of them know they can sell it.

You can. It's called a life settlement, and it's been legal in the United States since the Supreme Court decided Grigsby v. Russell back in 1911. The court ruled that a life insurance policy is your personal property, the same as a car or a piece of land, and you have the right to sell it. That ruling has been the law for more than a century but most people have never heard of it.

Here's how I explain it at the kitchen table.

What a life settlement actually is

When you sell your life insurance policy, an institutional buyer (usually a pension fund, hedge fund, or family office) pays you a lump sum today. They take over the premium payments going forward, and when the insured passes away, they collect the death benefit. That's pretty much the whole transaction. You walk away with money in your pocket and no further obligation to the policy.

The amount you get depends on a handful of factors that I'll get into below, but the headline is that it's almost always far more than your insurance company will give you if you cancel. In 2024, sellers who used a fiduciary broker received an average of 6.5 times their cash surrender value, according to the Life Insurance Settlement Association. That's not a typo. Six and a half times.

Who actually qualifies

Not every policy is sellable, and I'd rather tell you that upfront than waste your time. The general parameters look like this.

You should be 65 or older, though the strongest offers tend to come once you're past 70. The policy needs a face value of at least $100,000, and policies above $250,000 attract the most competitive bidding. Health matters because buyers are pricing how long they expect to pay premiums before the death benefit comes due, so a senior whose health has declined since the policy was issued usually gets a stronger offer than someone in perfect health. The policy needs to have been in force for at least two years (some states require five). And the type of policy matters, which I'll get to next.

For reference, the average insured age at settlement is around 76. If that's you or your parent, you fit right into that target market.

What kind of policy do you have

Universal life is the most common type sold in the secondary market. Guaranteed universal life tends to get the best pricing because the premiums stay level for life, which makes it easier for a buyer to model their costs. Indexed universal life can do well if it's funded properly. Whole life can be sold but typically gets weaker offers, partly because the premiums aren't flexible and partly because the cash value forces the buyer to come out of pocket more upfront just to acquire it.

Term insurance is the one that surprises people. Standard term has no resale value because it eventually expires. But if your term policy has a conversion privilege, meaning it can be converted into a permanent policy without a new medical exam, that conversion option itself can be worth real money. I've worked cases where a term policy that was about to expire and pay nothing turned into tens of thousands of dollars at settlement.

What your policy is probably worth

The honest answer is that it depends on age, health, premium load, and policy type. But the industry data gives you a sense of the range.

Aggregated broker data from the first half of 2024 showed an average net payout of about 20 percent of the death benefit. So a $1 million policy might settle somewhere in the neighborhood of $200,000, give or take. Some cases come in lower, around 10 to 15 percent. Others come in much higher, especially for older insureds with shorter life expectancies. The 2013 London Business School study, which looked at over 9,000 policies with more than $24 billion in combined death benefits, found that sellers received over four times what they would have received from surrendering.

Compare that to the alternative. If you cancel your policy with the insurance company, you get the cash surrender value, which on most universal life policies is a small fraction of the death benefit. If you let the policy lapse because you stopped paying premiums, you get nothing at all. Tens of billions of dollars in policy value are lost every year by seniors who picked one of those two paths because they didn't know there was a third one.

Why a fiduciary broker matters more than you think

Here's the part of the conversation where I have to be blunt. There are companies that buy policies directly from consumers. They advertise heavily on television, send direct mail, run online ads. Their pitch is usually "skip the broker and get more money." It sounds reasonable on the surface. It is not true.

Direct buyers are licensed providers buying for their own portfolio, or to flip to a larger institutional buyer at a markup. They have no fiduciary duty to you. They're trying to acquire your policy at the lowest possible price. Industry data from 2021 showed the largest direct buyer paid an average of about 16.7 percent of face value, while broker-facilitated transactions averaged over 20 percent of face value, even after the broker's commission came out. That gap is the cost of skipping the auction.

The flip dynamic tells you everything. One direct buyer reportedly sold a $300 million face-value portfolio to an institutional buyer for around $60 million. The seniors who originally sold those policies got a small fraction of what the direct buyer collected on the resale. The whole business model depends on the seller not knowing what the policy was actually worth in a competitive market.

A fiduciary broker is legally obligated to act in your best interest. They take your policy and submit it to 10 to 20 licensed institutional buyers at the same time, and those buyers bid against each other. The average closed policy in 2024 had nine competing bids before it settled. That's the auction direct buyers are trying to keep you out of.

Yes, the broker takes a commission. Even after the commission comes out, sellers who use a broker net significantly more than they would have from any single direct buyer offer. The competition more than pays for itself.

What the process looks like

From the day you reach out to the day the funds hit your account, expect somewhere in the range of 60 to 90 days. The first week or two is paperwork, getting your policy illustration, premium statements, and a HIPAA release so the underwriter can pull your medical records. The next couple of weeks are the life expectancy assessment, which is done by an independent medical underwriter, not the buyer. Then the policy goes to market for two to four weeks of bidding. Once you accept an offer, the closing and ownership transfer takes another two to four weeks, with the funds held in escrow until everything is verified.

You don't pay anything out of pocket. The broker is paid by the buyer when the deal closes. If you don't like any of the offers that come in, you don't take them. There's no obligation, no application fee, nothing.

When it makes sense to sell

If you're paying premiums on a policy you don't need anymore, this is worth a phone call. If your premiums have climbed to the point where you're considering letting the policy lapse, this is worth a phone call. If you've been quoted a surrender value that feels insulting (it almost certainly is), this is worth a phone call. If you need money for long term care, medical expenses, or just to make retirement math work, this is worth a phone call.

The worst that happens is you find out your policy doesn't qualify and you go back to whatever you were going to do anyway. The best that happens is you walk away with several times more money than your insurance company would have ever paid you. Not much downside to checking.

One last thing worth saying. Roughly 55 percent of seniors over 65 don't know life settlements exist, according to LISA's own surveys, and 90 percent of seniors who let a policy lapse said they would have considered selling if they'd known they could. That gap is the entire reason I do this work. Before you cancel a policy or let one lapse, find out what it's worth on the open market. You may be surprised.

About the author

Jeffrey Hallman is the founder of Citizens Life Group and an advisor at Asset Life Settlements, a licensed brokerage bound by fiduciary obligation to act in the seller's best interest. Jeffrey started Citizens Life Group after watching too many seniors sell their policies to direct buyers for a fraction of what competitive bidding would have delivered, and he believes every policy owner deserves to know what their policy is actually worth before accepting the first offer that comes their way.