Can you sell your life insurance policy if you are not terminal?
Yes, you can sell a non‑terminal life insurance policy through a life settlement, provided the policy meets age, type, and cash‑value criteria. The buyer pays a lump sum that is less than the death benefit but more than the surrender value, and assumes the premium payments.
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Eligibility requirements
Life settlement companies typically look for:
- Policyholder age 55 or older (younger policies are less common).
- Term, whole life, or universal policies with a substantial cash value.
- Premiums that are affordable for the buyer to continue.
How the settlement amount is calculated
The offer reflects three main factors: the policy's death benefit, its current cash surrender value, and the projected premium schedule. Older policyholders with higher benefits usually receive higher offers.
Steps to sell your policy
1. Contact a licensed life settlement broker.2. Provide policy documents and health information.3. Receive and compare offers.4. Accept an offer and sign the settlement agreement.5. Transfer ownership to the buyer, who takes over premium payments.
Potential impacts
Selling terminates the death benefit for your beneficiaries, may affect estate taxes, and could trigger a taxable gain if the settlement exceeds the policy's cost basis.
Comparison of key outcomes
| Option | Cash Received | Impact on Beneficiaries |
|---|---|---|
| Surrender to insurer | Cash surrender value (lowest) | Policy ends, no death benefit |
| Life settlement | Offer between surrender value and death benefit | Policy ends, no death benefit |
| Keep policy | None until death | Beneficiaries receive full death benefit |