Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our opinions or reviews. Learn how we make money.

Can I sell my life insurance policy?

You can sell your policy to a third party — but the payout might be lower than expected.

Updated . What changed?

If you don’t want your life insurance policy any more, you can sell it to a third party. This is known as a “life settlement.” They’ll get the payout when you die, and you’ll make a profit now — but it’ll be much less than the policy is worth.

When should I sell my life insurance policy?

You might consider selling your policy in these situations:

  • You’re having trouble affording premium payments.
  • You’ve accumulated enough assets and savings to cover any financial obligations after death.
  • You no longer need to provide for any financial dependents.
  • You’ve paid off your mortgage and other personal debts.
  • You want to use the proceeds to help with day-to-day expenses or retirement costs.

How does selling a life insurance policy work?

When you sell your life insurance policy, the new owner takes over paying the premiums. In exchange, they’ll receive the death benefit payout when you die.

You’ll generally want to engage a broker to help you sell your policy, or go with an insurer hat buys life insurance policies regularly. While you can sell your policy directly to another individual, it can be difficult to find a buyer and navigate legalities without help.

Once you’ve signed over your policy, you’re no longer responsible for paying any premiums. You may need to check in with the buyer occasionally to let them know you’re still alive.

The steps to selling a life insurance policy

If you’re ready for a life settlement, these are the steps:

  1. Double-check your state’s laws and insurer’s guidelines. They may impose rules as to when and whether you can sell your policy. For example, you may need to be over 65, or have a policy worth at least $100,000.
  2. Find a buyer. If you’re looking to bypass brokerage fees, you can either find a buyer or opt for a life settlement provider to connect you with potential buyers.
  3. Get your policy appraised. Your insurer may do this for free, while a life settlement broker may expect use their brokerage services.
  4. Compare offers. Wait for a competitive offer before selling.

Should I sell my life insurance policy?

Before selling your policy, consider the following:

  • Your dependents. Will your family be in any financial danger without the life insurance payout? Can they pay for funeral arrangements without going into debt?
  • Your debts. If you’re canceling your insurance policy because you have enough in cash and assets to leave your family, remember to factor in any debts you owe, including your mortgage, car loan and any credit card balances.
  • Taxes. You may need to pay a capital gains tax on any profit you make on your life insurance settlement.
  • How much you’ll make. Most life insurance policies only sell for 13% to 21% of their value. Consider whether that profit is worth giving up the policy.

What are the alternatives to selling your life insurance?

If a life settlement isn’t in your best interest, consider:

1. Adjusting your current policy

Review your current policy to see if you can save on your premiums by adjusting the:

  • Coverage amount. If you want to keep some coverage while still lowering your premiums, talk with your insurer to see if you can lower your coverage amount.
  • Optional features. For example, if you have a death benefit with add-ons for critical illness insurance and disability insurance, re-evaluate your coverage needs. If you’re no longer working, you might not need to rely on critical illness insurance to cover any lost wages if you get sick.
  • Risks. If you’re healthier now than you were when you took out the policy, talk to your insurer to see if you can negotiate a new rate. For example, if you quit smoking, lost weight or started exercising regularly, you may be able to negotiate for a lower premium.

2. Surrendering your permanent policy

If your life insurance policy has a cash value, you may be better off surrendering it to your insurance company and taking the profit — minus any fees. Talk to your insurer to find out how much you can get for cashing in your policy and compare it with the sale value.

3. Cancel your existing policy and find a cheaper alternative

If you want to cancel your existing policy and look for a better deal, it’s a good idea to wait to cancel until your new policy is active so that you don’t have a gap in coverage.

While you can get a policy without getting a medical exam, they tend to be more expensive. If you’re healthier now than you were when you took out your current policy, you may be able to save more by submitting a medical exam along with your application.

Consider using an insurance adviser to help you find a policy in your budget and explain any complex features and benefits.

Compare other life insurance policies

Name Product Issue Ages Minimum Coverage Maximum Coverage Medical Exam Required
Bestow
21 - 54 years old
$50,000
$1,000,000
No
Affordable 10- and 20-year term life insurance policies with instant quotes and no medical exams.
LadderLife™ Life Insurance
20 - 60 years old
$100,000
$8,000,000
No
Term life insurance with no policy fees and the freedom to cancel anytime. Simple application process that can get you approved for coverage instantly.
Policygenius
18 - 85 years old
$10,000
$10,000,000+
Depends on provider and policy
Compare affordable quotes from 12+ A-rated life insurance companies side-by-side.
Fabric
25 - 60 years old
$100,000
$5,000,000
No
Get affordable term life insurance with accelerated underwriting or no-exam coverage up to $1,000,000. Available in all states except CA, NY and MT.
Haven Life
18 - 64 years old
$100,000
$3,000,000
No
Customized term life insurance policies up to $3 million, no medical exam for certain applicants.
loading

Compare up to 4 providers

Bottom line

Selling your life insurance policy can make a profit, but you’ll generally get much less than the policy is worth. If you decide it’s the right option for you, use a broker to help you get the best deal. And if you’re on the fence, consider switching to a new life insurance policy instead.

Frequently asked questions

Ask an Expert

You are about to post a question on finder.com:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder.com provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and finder.com Terms of Use.

Questions and responses on finder.com are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.
Go to site