Life Settlements: How To Sell Your Life Insurance Policy (2024 Guide)

Rebecca Parson
Rebecca Parson

Rebecca Parson


Rebecca Parson is a financial and tech writer with 10 years of experience writing about topics such as life insurance, commodities investing, and the SaaS industry. She has a master’s degree from Johns Hopkins University and a bachelor’s degree from the University of Mary Washington. Her writing has appeared at,,,,, and more.

Brian OConnel
Brian OConnel

Brian O'Connel


Brian O’Connell has been a contributing writer for U.S News & World Report since 2016. A former Wall Street bond trader and the author of two best-selling books; “The 401k Millionaire” and “CNBC’s Creating Wealth”, he has 20 years experience covering business news and trends, particularly in the business and financial sectors. He believes education is the best gift a financial consumer can receive – and brings that philosophy to every story he writes. His byline has appeared in dozens of top-tier national business publications, including CBS News, Bloomberg, Time, MSN Money, The Wall Street Journal, CNBC,, Yahoo Finance, CBS Marketwatch, and many more.

By Rebecca Parson, Brian O'Connel
Author, Contributor, Life Insurance

If you don’t want to pay your life insurance premiums anymore or you need a large sum of cash, you might be considering selling your life insurance policy. This is called a life settlement.

Life settlement brokers or providers will help you sell your policy to an investor in life settlements. The buyer takes over paying your premiums and collects the death benefit when you die.

Of course, there’s a lot to consider and a lot of paperwork. It’s a huge financial decision. Our team at Beca Life has created a guide for how to sell your life insurance policy, so you can decide if it’s your best option.

Should You Sell Your Life Insurance Policy? Pros and Cons.

Deciding whether to sell your life insurance policy depends on several factors. For example, you might not need the policy anymore. Perhaps you got it years ago when your circumstances were different. Or maybe your children are now financially well off, and you need the money now more than they will in the future.

Whatever the situation, it’s a complex decision. Below are the major pros and cons of getting a life settlement. 

The Benefits of Getting a Life Settlement

Some of the benefits of selling your life insurance policy include:

  • Cash payout: If your life insurance policy no longer seems necessary, you might hesitate to cancel it because of all the payments you’ve made. Selling it can help you get some or all of that money back. Simply canceling will not.
  • No more premiums: Selling your policy means you get cash and also stop paying monthly premiums.
  • Spend the cash as you like: Selling your life insurance provides immediate access to its market value, whether you need funds for healthcare, to boost your retirement savings, or to cover unforeseen costs. The money is yours to use however you choose.

The Downsides of Selling Your Life Insurance Policy

The downsides of getting a life settlement include:

  • No future death benefit: If you sell your life insurance policy, your beneficiaries won’t get a payout later. 
  • Debt collection: If you have outstanding debts, creditors might be able to seize the money you get from selling your life insurance.
  • Could impact your benefits: As the Financial Industry Regulatory Authority (FINRA) notes, the cash payout you receive could “negatively impact your ability to receive state or federal public assistance such as Medicaid.” (Not Medicare.)

The 7 Steps to Sell Your Life Insurance Policy

In a nutshell, you get quotes from buyers, the buyers evaluate your policy and make offers, and you sell your policy to one of them. Here’s what that looks like in more detail.

1. Application

The first step in a life settlement transaction is to fill out a life settlement application. You’ll need to allow the life settlement provider or broker access to your life insurance policy and detailed health information. The more information you provide, the more likely you are to get a solid offer. 

2. Documentation

The broker or settlement company underwriters will gather information about your policy from your life insurance company, including policy premiums, death benefit amount, and a policy illustration. A policy illustration shows how your policy’s value is likely to change and what assumptions went into those calculations. The life settlement provider or broker will also request a copy of your medical records from your medical provider(s). Depending on the value of your policy, they may order one or two life expectancy report(s). 

3. Appraisal

Based on the information from the previous step, the broker or settlement company will price your life settlement (determine your policy’s market value). They’ll consider whether it’s a good investment for them, what medical experts say about your health, and whether there are signs of fraud.

4. Offer and Acceptance

The life settlement buyer will take the information provided and price the policy. If they are interested, they will propose an offer. You must carefully examine the offer(s) and consider whether it meets your financial needs and expectations. We recommend getting multiple offers. If you accept, the contract is signed, and the transaction proceeds.

5. Fund Escrow

The investor is required to place the total offer, including all fees, in an escrow account. This requirement ensures that the transaction is legitimate and protects both parties involved. 

6. Funds Transfer

Once the policy ownership has been transferred to the buyer, the funds will be released from the escrow account to the seller’s account. This final step in the process typically takes less than two weeks.

7. Rescission Period

After the transaction, the buyer assumes all the policy responsibilities, including paying the premiums. It is important to know that most states have a rescission period, which allows sellers to cancel their policy sales for a short period of time. Depending on the state, this period can last anywhere from 10 to 30 days.

How Long Does a Life Settlement Take?

The life settlement process usually takes 60 to 90 days. It takes the broker or buyer time to order the necessary documents to price the policy correctly. It can take over 90 days, but, if needed, some life settlement buyers can complete the sale in under 30 days with the cooperation of all parties. 

The reason the timeframe can vary so much is that:

  • You might have to deal with bureaucratic delays when requesting medical records from medical provider(s).
  • Your life insurance company might take a while to complete the policy transfer.
  • You might want to meet with your CPA, financial advisor, or estate planning attorney before making a final decision about proceeding with the sale.

Often, however, the investor and broker will go out of their way to speed up the process and make it as fast as possible for you.

Why Is My Life Settlement Delayed?

Delays in a life settlement process can happen for a few reasons:

  • Medical records: Incomplete or inaccessible medical records can delay the process because they’re pivotal in determining the policy’s value.
  • Insurance company: A delay will occur if the insurer is slow to respond to requests for policy information or transfer paperwork. 
  • Policy complexity: If there are discrepancies in the policy details or the policy is complex, it may take extra time to analyze and resolve these issues. 
  • Communication: Lack of cooperation or communication among all parties can delay the life settlement process.

Can I Rush The Life Settlement Process?

Yes, you can rush the process to a degree. There are two primary areas where the seller can help accelerate the process: getting medical records released as quickly as possible and filling out paperwork promptly.

The area you can’t rush involves your insurance company. It must comply with the broker’s or provider’s request for specific information, including illustrations and past premiums paid. Some insurance companies are more responsive than others.

One of the delays in most life settlements is when the policy is out for bid. The policy owner will often take 2-4 weeks to make a final decision. This is one area where the seller can speed up the process. 

What If I Can’t Afford To Pay My Life Insurance Premiums Until Closing?

An investor or broker may sometimes agree to front the premiums until closing. However, this must be agreed upon before the process begins and clearly stated in the life settlement contract. 

Fronting premiums is not standard, and the buyer may ask you to sign a letter of intent and include a clause obligating you to reimburse premium payments if the transaction doesn’t go through.

Life Settlement Taxes: Financial Implications

Many people are worried selling their life insurance policy will result in heavy taxes. For most people, though, life settlement taxes are minimal.

Are Life Settlement Proceeds Taxable?

The amount you paid in premiums is not taxable. So, if you paid $75,000 in premiums and receive a $100,000 life settlement, $75,000 isn’t taxable. You only pay taxes on $25,000 (the “profit”).

The Tax Cuts and Jobs Act (TCJA) greatly changed and simplified life settlement taxes. The TCJA took effect on January 1, 2018, so if you’re reading life settlement tax information online, make sure it’s recent and from a reputable source.

While the taxes on life settlements are minimal, there are no taxes on viatical settlements if the seller meets the exemption requirement. The viatical exemption establishes that all the life settlement proceeds are tax-free (regardless of premiums paid into the policy) if a doctor estimates the insured’s life expectancy at less than 24 months.

Are Life Settlement Proceeds Heavily Taxed? 

Life settlement proceeds aren’t heavily taxed since only the “profit” is taxed. 

Are Life Settlements Taxed More Than “Policy Surrenders?” 

No, it’s no longer the case that policy surrenders are more tax-favorable than life settlements.

Less Common Situations Affecting Life Settlement Proceeds

While the answers above apply to most people, there are some situations where the tax consequences of a life settlement can be significant. These outcomes typically involve policies with a very high face value or relatively new policies when the insured’s health deteriorates rapidly after purchasing the policy.

Transferring Your Life Settlement Policy

If a loved one or relative takes over the policy, the new owner receives the full face value of the policy when it matures without any tax liability. This transfer can benefit a relative or friend if they do not pay for the policy transfer. The IRS views any payment for a life insurance policy as a life settlement, and the maturity proceeds will be taxable income.

While transferring the policy doesn’t financially benefit the insured or his beneficiaries, it helps keep the future benefit in the family. If interested in this option, consult a tax professional to ensure the transfer is correctly processed.

What Happens After My Life Settlement Closes?

After your life settlement closes, the lump sum payment will be released from escrow. At this point, the life settlement company will own your policy and continue making premium payments until the policy matures. 

The life settlement company will typically contract with a third-party servicer to contact you periodically to check for updates to your address and health status. The servicer may also periodically request updated medical records from your physician. 

Keep accurate records and maintain communication with the servicer in case any changes need to be made.

How Often Will The Servicer Contact Me?

Many states regulate how often the servicer can contact you or your designated point of contact. Most states allow the buyer or servicer to reach out to you every three months. 

The servicer usually asks if there are any address changes, changes in contact information, or changes in the insured’s health. The seller can often control whether the mode of communication is phone, email, or snail mail.

Can I Change My Mind After I Sell My Life Insurance Policy?

Yes, after a life settlement, you have 10-30 days to change your mind, depending on your state. Contact your broker or provider as soon as possible if this happens so you don’t miss your window.

Who Can Sell Their Life Insurance Policy?

Not everyone can sell their life insurance policy for cash, but the rules are clear.

You can sell your policy if you are the owner and the insured person. For example, if you have a policy on someone else, like your child, you likely can’t sell it.

Most buyers look for a minimum death benefit of $100,000. This is because there is a lot of paperwork involved and many do not see the net death benefit of less than $100,000 as worth the time and effort it takes to do a life settlement

There might also be age limits for selling your life insurance policy. Generally, investors look for policies on insureds at least 65 years old unless the insured’s health has deteriorated significantly since he or she took out the policy.

What Are Your Other Options Besides a Life Settlement?

A life settlement isn’t necessarily the best option. Some alternatives to selling your life insurance policy include:

  • Use the cash value: For whole and universal life insurance, you can access the cash value once it reaches a certain level, either by withdrawing or borrowing against it. If you take out a loan, the death benefit will be reduced unless you repay the funds.
  • Get an accelerated death benefit: Many policies offer an accelerated death benefit if you’re diagnosed with a terminal illness, so you can receive some of the death benefit early to cover medical costs. This is not available for all policies and the eligibility requirements for this benefit are hard to meet. 
  • Reduce the death benefit: To decrease your premiums, some policies allow upi to reduce the death benefit of your policy. Consult with your insurance agent about this possibility. 

Before you make a decision, we recommend consulting with a financial advisor, estate planning attorney, insurance agent, and/or accountant. Their personalized advice can help you understand the legal and financial implications for you and your heirs.

Our Final Thoughts on Selling Your Life Insurance Policy

Selling your life insurance policy involves complex legal and financial considerations. Before you decide to pursue a life settlement, consider your alternatives.

However, if your only choices are to surrender the policy or let it expire, selling is the better option.

As always, we’re happy to discuss your specific situation to provide more tailored guidance. It’s always worth understanding what a life settlement can provide you.

If you’d like to chat about your situation, contact us here to schedule a time to connect.

Frequently Asked Questions About Selling Your Life Insurance Policy

Who Does a Life Settlement Broker Represent?

A life settlement broker represents the seller.

How Much Can You Sell a $1,000,000 Life Insurance Policy for?

Depending on the premiums, age, and health of the insured, a $1,000,000 life insurance policy can sell for anywhere between $10,000 and $750,000. Offers will vary; always get multiple offers before selling your policy.

Is It a Good Idea to Sell My Life Insurance Policy?

Selling your life insurance policy almost always gets you more money than surrendering (canceling) or letting it lapse.

How Much Can You Get for Selling a Life Insurance Policy?

If your policy has value, you can receive anywhere from 2% to 75% of the face value or death benefit when you sell your life insurance policy.

What Is A Life Settlement Servicer?

A life settlement servicer is a company that manages the policy on the buyer’s behalf after a life settlement transaction takes place. The servicer is responsible for tracking and paying premiums, ensuring policy compliance, maintaining accurate records, and communicating with insureds regarding any changes in contact information or health status.

Will The Buyer Have Access To My Medical Records?

Yes. When you sell your policy, you will sign a limited power of attorney (LPOA) that allows the buyer to order medical records in the future. 

Do I have to Speak to the Buyer of my Policy?

No, you can designate someone (like a family member) to respond to inquiries from the buyer. This designation is made as part of the life settlement closing process.

Which Companies Service Policies?

Three big companies service most policies today: 21st, Asset Life Settlements, and Coventry Direct.

Sell your life insurance policy for cash.

See if you qualify now.

We’re here to help. Speak with a Policy Specialist today at +1 848-456-8333