Your life insurance policy may be worth more than you think.
If you have a life insurance policy you no longer need, you may be able to sell it for significantly more than its cash surrender value. We'll walk you through how life settlements work and whether you qualify.
What is a life settlement?
A life settlement is the sale of an existing life insurance policy to a third-party buyer for more than its cash surrender value but less than the death benefit. Instead of surrendering your policy back to the insurance company for a fraction of its worth — or simply letting it lapse — you sell it to an investor and walk away with a lump-sum cash payment.
Most policyholders don't know this option exists. Many are leaving thousands of dollars on the table every year by surrendering policies instead of settling them.
Do you qualify for a life settlement?
Policy requirements
Your policy must have a face value of $100,000 or more and have been in force for at least 2 years. Both term and permanent policies may qualify.
Age & health
Most candidates are age 65 or older, or have experienced a change in health since the policy was issued. Changes in health can actually increase your policy's settlement value.
Life changes
Common reasons to consider a settlement: premiums have become unaffordable, you no longer need the coverage, you need liquidity, or your estate planning needs have changed.
Ready to find out what your policy is worth?
A free 10-minute call is all it takes. We'll review your policy, explain your options, and tell you whether a life settlement makes sense for your situation.
Frequently Asked Questions
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A life settlement is the sale of an existing life insurance policy to a third party for a lump-sum cash payment that's typically higher than the policy's cash surrender value but less than its death benefit. The buyer takes over premium payments and receives the death benefit when the insured passes away. It's most often used by policyholders who no longer need or can no longer afford their coverage.
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Typical qualification criteria include being age 65 or older, holding a policy with a face value generally above $100,000, and having some change in health or financial circumstances since the policy was issued. Term policies can sometimes qualify if convertible to permanent coverage. Every case is evaluated individually, since qualification depends on the buyer's underwriting criteria as well as the policy terms.
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Life settlement payouts commonly range from roughly 20% to 60% of the policy's death benefit, though the exact amount depends on the insured's age and health, the policy type, and current premium costs. Life expectancy plays a major role — settlements tend to pay more as life expectancy shortens. Getting multiple offers is the best way to find out your policy's actual market value.
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Life settlement proceeds can be partially taxable, generally split between a tax-free return of the premiums you've paid, ordinary income tax on gains up to the policy's cash surrender value, and capital gains tax on any amount above that. Tax treatment depends on individual circumstances, so consulting a tax professional alongside your broker before finalizing a settlement is recommended.
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Surrendering a policy back to the insurance company typically pays out only the cash surrender value, which is often lower than what a life settlement buyer will pay. A life settlement involves selling the policy to a third party instead, usually resulting in a larger payout since the buyer values the policy based on the death benefit and the insured's life expectancy rather than the insurer's surrender formula.