Life Settlement Guide: How to Sell Your Life Insurance Policy

After the policyholder passes away, life insurance can serve to safeguard their loved ones, and occasionally it even has advantages for the living. However, the policyholder might decide to sell the life insurance policy if they no longer require or want the coverage. 

Can a life insurance policy be sold?

A life settlement occurs when a life insurance policy is sold to a third party. The amount the policyholder receives is often significantly less than the policy’s death benefit. However, it may occasionally exceed the cash surrender value of the insurance.

The policyholder works with a broker who finds a buyer for them. The broker receives a portion of the lump sum payment that the buyer makes to the insured as compensation. Then, when the original policyholder passes away, the buyer continues to pay the policy’s premiums and gets the death benefit.

How a life insurance policy is sold

The following are the fundamental actions you’ll take when selling your life insurance policy:

  • Finding a broker: To ascertain whether their life insurance policy is sellable, the policyholder discusses their health and life insurance policy details with one or more interested brokers.
  • Making the sale: The broker links the policyholder and the new purchaser, who will purchase the policy, together. The buyer pays the price agreed upon to the insured. All expenses associated with the account are released to the policyholder, and the buyer pays the premiums on their behalf.
  • Receiving the death benefit: In the event of the policyholder’s passing, the death benefit is paid to the purchaser rather than the initially specified beneficiaries.

What amount of money might you receive from a life settlement?

How much a person receives from a life insurance settlement depends on a number of variables, including:


Brokers prefer to engage with policyholders at least 65 years old because they are more likely to pass away than younger ones. This implies that buyers will be able to recover their investment more quickly.


Typically, those who are sicker get paid more than those who are well. Additionally, the policyholder’s ill health suggests that they are more likely to pass away sooner.

Policy worth

Brokers typically need life insurance policy owners looking to sell their policies to have a death benefit of at least $100,000 in order to attract buyers. Bigger coverage limits on insurance policies typically result in higher payouts than lower coverage limits.

Security of the insurer’s finances

Insurance policies from corporations with higher financial strength ratings from unbiased agencies will cost more to buyers. This suggests that the business will endure for many years to come and will be able to fulfill its responsibilities to policyholders.

When a life settlement may be appropriate

A life settlement may be a reasonable option when a person no longer needs life insurance due to the absence of any financial dependents. People who have trouble paying the premiums and those who require a large sum of money at once might also wish to give it some thought. There are other options, though, that might be able to assist these people without some of the drawbacks of life settlements.

Selling a life insurance policy: What to do

Take the following actions if you intend to cash out your life insurance policy:

  • Assemble key documents: To decide if they would like to work with them, brokers will need information about the life insurance policy and the policyholder’s medical history. Putting this data together as soon as possible can help you save time later.
  • Find trustworthy brokers: Interview various brokers. Find out if the business has a license from the state. Additionally, you will want to check on how they calculate their commissions, and if there are any additional expenses you should be aware of.
  • Compare different offers: Before making a contract with any broker, it’s a good idea to first chat with a few of them. Customers should compare what each firm has to offer and choose the one they feel most at ease with.