Most people think of life insurance as a long-term safety net–but under the right circumstances, it can also be a financial asset. Through a process called a life settlement, you can sell your life insurance policy to a licensed third-party buyer in exchange for a lump-sum cash payment. After the sale, the buyer takes over premium payments and collects the death benefit when the insured passes away. For many policyowners, this option becomes especially appealing when financial needs arise, or the original purpose for the policy–such as supporting dependents or covering estate taxes–no longer applies.
So, can you sell a life insurance policy and actually benefit from it? Yes–and in many cases, the payout from a life settlement is often higher than what you’d receive by surrendering the policy or letting it lapse. Whether you’re looking to cover medical expenses, reduce monthly premiums, or reinvest in other opportunities, selling your life insurance could offer much-needed flexibility. In this guide, we’ll explain how to sell your life insurance policy, including who qualifies, how the process works, what kind of financial return you can expect, and how to get started.
Key Takeaways
- A life settlement involves selling your life insurance policy to a licensed third-party buyer for a lump-sum cash payment–typically offering more value than surrendering the policy or letting it lapse.
- To qualify, most sellers are 65 or older and own a policy with a face value of $100,000 or more. Permanent policies (like whole or universal life) are most commonly accepted.
- The process generally includes a policy review, receiving offers, accepting a bid, and finalizing the sale with legal and financial documentation.
- Payouts are usually higher than the cash surrender value, and amounts received above the premiums paid may be subject to taxation, with portions potentially treated as ordinary income or capital gain depending on the policy structure.
- Ovid provides a trusted, straightforward way to get a quote and explore your options, connecting with top-rated buyers through a simple process.
What Does It Mean to Sell Your Life Insurance Policy?
Selling your life insurance policy—also known as a life settlement—means transferring ownership of your policy to a licensed third-party buyer in exchange for a lump-sum cash payment. Once the sale is complete, the buyer becomes the new policyowner and takes over responsibility for all future premium payments. When the insured person passes away, the buyer—not the original policyowner’s beneficiaries—receives the death benefit.
It’s important to distinguish between a life settlement and a viatical settlement. While both involve selling a life insurance policy, viatical settlements are designed for individuals diagnosed with a terminal illness and, in some cases, qualifying chronic illnesses, often with a limited life expectancy. These transactions tend to move quickly and offer immediate financial support for urgent medical needs or end-of-life care.
For sellers, the biggest advantage of a life settlement is freedom. Once your policy is sold, you’re no longer responsible for making payments or maintaining the policy. You’re released from all future obligations—and you walk away with cash in hand that can be used however you choose.
Who Is Eligible to Sell a Life Insurance Policy?
Not everyone can sell their life insurance policy, but many people are surprised to learn they qualify. In most cases, policyowners are 65 years or older, although individuals facing serious or chronic health conditions may be eligible at a younger age. The type and size of the policy also matter—universal life, whole life, and convertible term policies are typically accepted, with a minimum face value of $100,000.
The insured’s health status plays a major role in determining how much a buyer is willing to pay. Even if the policyowner is not the insured person (as in the case of a spouse or adult child holding the policy), the insured’s age and medical condition will influence the offer amount. That said, you don’t have to be in financial distress or poor health to qualify. Many people choose to sell their policy simply because their coverage needs have changed or they see better ways to use their money today.
How to Sell Your Life Insurance Policy
If you’re wondering how to sell your life insurance policy, the good news is that the process is typically straightforward–and often managed with the help of a provider or licensed broker. A life settlement involves a few key steps, and while it may seem complex at first, knowing what to expect at each phase can help you feel confident and prepared. From gathering your policy details to receiving your final payment, most of the heavy lifting is handled for you–but understanding the process ensures a smoother experience and can lead to a better financial outcome.
In the sections below, we’ll walk you through each step of the life settlement journey so you know exactly what’s ahead.
1. Get a Policy Appraisal or Estimate
Before listing your policy for sale, it’s important to understand its market value. A policy appraisal gives you a ballpark estimate of what your life insurance might sell for, based on factors like the type of policy, premiums, and your health status. Reputable providers like Ovid offer this service at no cost–and there’s no obligation to move forward. It’s a smart first step that helps you decide whether selling is the right move.
2. Complete an Application
If you choose to move forward, you’ll need to complete a short application. This typically includes details about your policy–such as the type, face value, and premium amount–as well as information about the insured person’s medical history. You’ll also be asked to provide ownership documents to confirm that you have the right to sell the policy.
3. Underwriting and Offer Evaluation
Once your application is submitted, the underwriting process begins. Buyers evaluate your policy based on several factors, including the insured’s life expectancy, how much the premiums cost, and how the policy is structured. In most cases, you’ll receive multiple offers, allowing you to choose the one that offers the most value for your specific situation.
4. Finalize the Sale
After selecting the best offer, you’ll work with the provider to complete the required documentation. This includes forms to transfer ownership, verification of policy terms, and any legal disclosures required by your state. Once everything is signed and submitted, the buyer becomes the new owner of the policy and takes over all future premium payments.
5. Receive the Payment
Once the transaction is finalized and processed through escrow, you’ll receive your lump-sum payment–often within a few weeks. This cash is yours to use however you choose, whether that’s covering medical bills, boosting your retirement savings, or simply enjoying greater financial freedom.
What Is Your Insurance Policy Worth?
When considering how to sell your life insurance policy, one of the first questions people ask is: How much can I get for it? While every case is different, life settlement payouts often range from approximately 10% to 50% of the policy’s death benefit. That means a $250,000 policy could potentially yield a settlement of $25,000 to $150,000, depending on several key factors.
What influences your policy’s value? Here’s what buyers look at:
- Policy type and face value: Universal life, whole life, and convertible term policies with face values of $100,000 or more tend to attract more interest.
- The insured’s age and health condition: Older individuals or those with serious health conditions often receive higher offers due to short projected life expectancy.
- Premium costs and time horizon: Policies that are less expensive to maintain are more attractive to buyers, especially if they’ve been active for several years.
Because no two policies are alike, it’s smart to compare offers from multiple buyers. This gives you the best chance of securing the highest possible value–and that’s where trusted platforms like Ovid can make all the difference.
Pros and Cons of Selling Your Life Insurance Policy
Deciding whether to sell your life insurance policy is a personal and financial decision that deserves careful thought. While selling can unlock significant value, it also comes with trade-offs. Weighing the pros and cons can help you make the choice that best aligns with your current needs and long-term goals.
Pros
- Access to immediate cash that can be used for healthcare expenses, paying off debt, supplementing retirement income, or any other financial goal.
- No more premium payments, which can offer relief if your policy has become too costly to maintain.
- Often better value than surrendering or lapsing, as life settlement offers are frequently higher than a policy’s cash surrender value.
Cons
- No death benefit for original beneficiaries, which means your loved ones won’t receive a payout when the insured passes away.
- Potential tax liability on any amount received above the total premiums paid into the policy.
- Limited eligibility depending on your policy type, age, and health status—not every policy qualifies.
Understanding both the upsides and drawbacks helps ensure that you’re making an informed, confident decision that fits your financial future.
Get the Most from Your Policy with Ovid
Before you cancel your policy or let it lapse, take a moment to find out what it might actually be worth. You could be sitting on a valuable asset without even knowing it.
At Ovid, we make the life settlement process simple, transparent, and secure. Whether you’re curious about your options or ready to move forward, we’re here to help every step of the way.
Get a free, no-obligation quote to see what your policy is worth today–and unlock the hidden value in your life insurance.
Frequently Asked Questions
Can I sell a term life insurance policy?
In most cases, only convertible term policies are eligible for a life settlement. Pure term life policies without a conversion option typically don’t qualify because they don’t build cash value and eventually expire.
How long does the life settlement process take?
The process usually takes 4 to 8 weeks from start to finish. Delays can happen if additional documentation or medical records are needed during underwriting.
Is the money I receive from selling taxable?
Yes, some portion of the payout may be taxable, particularly if the amount you receive exceeds the total premiums you’ve paid into the policy. It’s best to consult a tax advisor to understand your specific situation.
Will I owe premiums after selling my policy?
No–once the sale is finalized, the buyer becomes the new policyowner and takes over all future premium payments. You’re fully released from any financial obligations.
What if I change my mind after accepting an offer?
Most states offer a rescission or “free look” period, which gives you time to cancel the sale even after signing. Be sure to ask your provider about the specific rules in your state.
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About Ovid
Ovid is a life settlement exchange. We instantly match you with institutional buyers who are interested in your policy, based on you and your policy profile. Getting an offer for your policy from Ovid buyer partners is completely free. If you do want so sell your policy, Ovid has proven to help obtain average payouts above the industry average. We’re based in San Francisco and have been featured in Forbes, US News, Business Insider for the incredible work we do for consumers. You can learn more about Ovid here.
