How to Sell Your Life Insurance Policy

If you have a life insurance policy you no longer want or can’t afford, stopping payments or simply cashing it in aren’t your only options — or even your best ones.

Many people have sold their policies in a life settlement sale and come out the other side with cash in hand — but it isn’t easy.

How it works

You can convert your life insurance policy into cash now, but the process is complicated.

First, you’ll need to have your life insurance policy appraised to determine the selling value. Then, you’ll need to find a buyer. Once you have a buyer in place, you’ll receive a cash settlement and the buyer will pay any premiums and collect the benefit when you die.

Finding a buyer on your own can be complicated, if not impossible. That is why many people choose to either sell their policy to a settlement company or to a third party through a life settlement broker. If you sell to a settlement company, you’ll receive a percentage of your policy’s value in cash. If you use a broker, you may also pay a commission to the broker. However, a broker may be able to find a better deal than you would on your own.

What you need to know

There are a few things you should consider before selling your policy. For example:

  • Your life insurance policy may not have much value on the market.
  • You won’t get the full face value.
  • Brokers charge a commission.
  • Buyers don’t want every policy. Buyers may be looking for people over the age of 65 with chronic or terminal illnesses. If you’re young and healthy, your policy won’t be as attractive to a buyer.
  • You may have tax complications. Your settlement could be subject to income tax.
  • It isn’t your only option. If you’re selling because you need cash, you may have other options, such as taking a loan against your life insurance policy, accelerating your payout date or selling the policy to a family member. However, keep in mind that these options also have pitfalls and should be discussed with a financial adviser.

How to sell

Selling isn’t all bad, especially if you no longer want the policy or you can’t afford the premiums. If you do decide to sell, take these steps to make sure you get the most money:

  • Understand the rules. Your life insurance policy has rules about selling, and your state laws regulate the process. Make sure you understand these before you try to sell. If you don’t fully understand, an independent financial adviser can help sort things out.
  • Don’t take the first offer. There are no set values for life insurance policies, and the offers you receive from buyers can vary widely. Review several to make sure you’re getting the best deal.
  • Talk to an expert. Consult an accountant to see what tax liability and eligibility changes you will face after the sale.
  • Check your debts. If you have large debts, your creditors may have a claim to any cash you receive from your life insurance settlement. If you have debts, discuss them with a financial adviser before you sell.

The bottom line: If you don’t want your life insurance policy, it’s worth a call to find out what you could get, but be cautious about going through with it. Make sure you’re getting the best possible deal before you sign off.

How to find cheaper car insurance in minutes

Getting a better deal on car insurance doesn't have to be hard. You can have The Zebra, an insurance comparison site compare quotes in just a few minutes and find you the best rates. Consumers save an average of $368 per year, according to the site, so if you're ready to secure your new rate, get started now.

Read Next
10 Common Ways Seniors Get Scammed
10 Common Ways Seniors Get Scammed

Here’s what to watch for to make sure you don’t fall prey to some of the biggest rip-offs targeting seniors.

How to Get the Best Possible Deal on Car Insurance
How to Get the Best Possible Deal on Car Insurance

This is the last article on understanding and shopping for car insurance that you’ll ever need.

9 Forgotten Frugal Strategies — and How to Resurrect Them
9 Forgotten Frugal Strategies — and How to Resurrect Them

These time-tested methods can help us live smarter today.

10 Products That Upgrade Your Home for Less Than $45
10 Products That Upgrade Your Home for Less Than $45

Make a fresh start with these affordable Amazon buys.

13 Affordable Products for a Better Night’s Rest
13 Affordable Products for a Better Night’s Rest

These Amazon products can help you finally catch 40 winks — or more.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
This Gas Station Scam Is Victimizing More Drivers
This Gas Station Scam Is Victimizing More Drivers

For the second straight year, a growing number of Americans believe they’ve fallen prey to this scam.

Social Security Checks Likely to Grow This Much in 2021
Social Security Checks Likely to Grow This Much in 2021

The federal government recently released a key statistic that gives clear insight into what next year’s COLA will be.

The Safest Grocery Store to Shop During the Coronavirus
The Safest Grocery Store to Shop During the Coronavirus

One grocery chain stands especially tall in its efforts to keep stores safe in the age of COVID-19.

21 Things You Should Always Buy at a Dollar Store
21 Things You Should Always Buy at a Dollar Store

Dollar stores have great bargains on both everyday and occasional purchases.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

7 Unusual Ways to Declutter Your Home
7 Unusual Ways to Declutter Your Home

Tired of possessions weighing you down? Here are seven ways to declutter painlessly and effectively.

This Is the Most Popular Age for Claiming Social Security
This Is the Most Popular Age for Claiming Social Security

Both men and women are most likely to start receiving Social Security benefits at this age.

6 Things You Should Never Buy at Trader Joe’s
6 Things You Should Never Buy at Trader Joe’s

We love Trader Joe’s for plenty of reasons. But think twice about this handful of products.

Don’t Toss These 7 Household Items — Sell Them
Don’t Toss These 7 Household Items — Sell Them

Here’s how to earn cash as you give new life to these unwanted items.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

6 Legal Documents Retirees Need — but Don’t Have
6 Legal Documents Retirees Need — but Don’t Have

Few retirees have these documents that are crucial to their golden years — especially during a pandemic.

7 Hobbies That Help You Live Longer
7 Hobbies That Help You Live Longer

Research shows some hobbies can add years — or even decades — to your life.

Eat This Food If You Want to Avoid Alzheimer’s Disease
Eat This Food If You Want to Avoid Alzheimer’s Disease

One type of food associated with the Mediterranean diet offers especially large benefits.

5 Awesome Places You Can Retire Overseas on $2,000 a Month or Less
5 Awesome Places You Can Retire Overseas on $2,000 a Month or Less

In this week’s podcast: tips on retiring overseas — from someone who’s been helping American expats for decades.

11 Expenses That Quietly Drain Your Wallet
11 Expenses That Quietly Drain Your Wallet

It’s scandalously easy to overspend in these areas of your life.

Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?
Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?

You could save more than $30,000 by setting aside these costly expenses for just one year.

18 Amazon Purchases That We Are Loving Right Now
18 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

9 Dumb Ways You Are Ruining Your Home Value
9 Dumb Ways You Are Ruining Your Home Value

Homeowners, beware these mistakes that can drive away potential buyers.

7 Tips for Building an Emergency Stockpile
7 Tips for Building an Emergency Stockpile

A pandemic or natural disaster could leave you reliant on your existing food supply. Is your pantry prepared?

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.