Quick Answer
Yes, you may be able to sell a term life insurance policy, but it depends on the policy type and your eligibility. In most cases, people sell a policy through a life settlement, where ownership of the policy transfers to a third party in exchange for a lump sum cash payment. Some term life insurance policies must first be converted to permanent life insurance before they can qualify.
Why This Matters
A life insurance policy is a financial contract designed to pay a death benefit to a beneficiary. But circumstances change—people may face rising expenses, health issues, or no longer need coverage after paying off a mortgage or reaching retirement.
Understanding whether you can sell your life insurance policy may help you access the value of your policy during your lifetime instead of letting coverage lapse or allowing a policy to expire with no payout. However, underwriting, life expectancy, policy type, and the remaining term all influence eligibility.
Coverage rules, underwriting practices, and tax treatment vary by state.
Table of Contents
- What Does It Mean to Sell a Life Insurance Policy?
- Can You Sell a Term Life Insurance Policy?
- How Life Settlements Work
- Converting Term Life to Permanent Coverage
- Life Settlement vs. Viatical Settlement
- How Much Money Can You Receive?
- Eligibility and Underwriting Factors
- Who It’s Best For
- When It Might Not Be Ideal
- FAQs
Another option is a viatical settlement.
A viatical settlement is similar to a life settlement but is typically available when the insured has a terminal illness or serious disease.
Settlement Type | Who Qualifies | Payment |
Life Settlement | Older policyholders or those with health changes | Lump sum cash |
Viatical Settlement | Individuals with terminal illness | Usually higher percentage of face value |
These settlements help policyholders cover medical expenses, debt, or living costs.
What Does It Mean to Sell a Life Insurance Policy?
Quick Answer
A life settlement is the sale of an existing life insurance policy to a third party for a lump sum cash payment. The buyer becomes the new policy owner, continues paying premiums, and collects the death benefit when the insured dies. Life settlements are most common with permanent life insurance policies.
Selling a life insurance policy usually happens through a life settlement transaction. In this process:
- You sell your insurance policy to a third party, often through a life settlement broker or life settlement provider.
- The buyer becomes the new owner of the policy.
- The buyer takes over premium payments.
- When the insured person passes away, the buyer receives the death benefit.
The seller receives a lump sum of cash that is typically higher than the cash surrender value but lower than the face value of the policy.
Can You Sell a Term Life Insurance Policy?
Quick Answer
You may be able to sell a term life insurance policy if it can be converted into permanent life insurance. Many buyers require the policy to be converted to whole life or universal life because permanent policies build cash value and last for the insured’s lifetime.
Term life insurance provides coverage for a specific period, such as 10, 20, or 30 years. Unlike whole life insurance or universal life insurance, most term life insurance policies do not build cash value.
However, you may be able to sell your term life insurance if:
- The policy is convertible to permanent life insurance
- The insured person has a limited life expectancy
- The remaining term is long enough
- The face value of the policy is large enough to attract buyers
If a policy expires soon or is non-convertible, it may not qualify.
How Life Settlements Work
The process of selling a life insurance policy typically involves several steps.
- Contact a life settlement broker or provider
A life settlement broker helps find buyers among life settlement companies. - Submit policy information
Buyers evaluate the type of policy, face value, premiums, and medical underwriting information. - Health and life expectancy review
A buyer analyzes health history, diseases like cancer, and projected life expectancy. - Receive offers
Different life settlement providers may submit an offer to purchase the policy. - Complete the life settlement transaction
Ownership transfers and the seller receives a lump sum cash payment.
A life settlement transaction transfers ownership of a life insurance policy to a third party. The seller receives cash, and the buyer becomes responsible for premium payments while gaining the right to receive the death benefit.
Converting Term Life to Permanent Coverage
Many people must first convert their term policy before they can sell their term life policy.
Some convertible term policies allow the policyholder to:
- Convert your term policy into whole life insurance
- Convert to universal life insurance
- Convert to variable universal life insurance
This option allows a term policy to become a permanent policy, which is more attractive to buyers in the life settlement market.
Permanent coverage types include:
- Whole life insurance policies
- Universal life policies
- Variable universal life insurance
These policies often build cash value, which affects the present value and price buyers are willing to pay.
Life Settlement vs. Viatical Settlement
Another option is a viatical settlement.
A viatical settlement is similar to a life settlement but is typically available when the insured has a terminal illness or serious disease.
Settlement Type | Who Qualifies | Payment |
Life Settlement | Older policyholders or those with health changes | Lump sum cash |
Viatical Settlement | Individuals with terminal illness | Usually higher percentage of face value |
These settlements help policyholders cover medical expenses, debt, or living costs.
How Much Money Can You Receive?
The value of your policy depends on several factors:
- Face value of the policy
- Remaining term
- Premium payment amount
- Health and life expectancy
- Current interest rates
- The policy’s pricing structure
- Whether it has cash value
Buyers estimate the present value of the future death benefit and subtract expected expenses, premiums, and investment risk.
A financial adviser or life settlement broker can help estimate the price you might receive.
Eligibility and Underwriting Factors
Not everyone can sell their life insurance policy. Buyers typically evaluate:
- Age of the insured
- Health condition and medical underwriting
- Life expectancy
- Type of life insurance
- Face value
- Remaining policy term
- Premium costs
Policies with larger death benefits often attract more interest from life settlement companies.
Who It’s Best For
Selling a life insurance policy for cash may work well for people who:
- No longer need the death benefit
- Have increasing insurance premium costs
- Want lump sum cash for retirement
- Face major medical expenses
- Own a large permanent life insurance policy
It can also help individuals whose beneficiaries no longer rely on the policy.
When It Might Not Be Ideal
Selling a policy may not be the right choice if:
- Beneficiaries still need the death benefit
- The policy is non-convertible
- The remaining term is short
- The payout would be smaller than expected
- Tax implications outweigh the benefits
A life insurance policy is a personal financial decision, so many people consult a financial adviser before proceeding.
Frequently Asked Questions
Can you sell your term life insurance policy for cash?
Yes, but not all term life insurance policies qualify. Some must first be converted into permanent life insurance, such as whole life or universal life, before they can be sold in a life settlement.
What is a life settlement?
A life settlement is when a policyholder sells a life insurance policy to a third party for a lump sum payment that is greater than the policy’s cash surrender value but less than the death benefit.
Do term life policies have cash value?
Most term life policies do not build cash value. They provide temporary coverage that pays a death benefit if the insured dies during the term.
What is a convertible term policy?
A convertible term policy allows the policyholder to convert the policy into permanent life insurance, such as whole life or universal life, without new medical underwriting.
Who buys life insurance policies?
Policies are usually purchased by life settlement providers, institutional investors, or funds that specialize in life settlements.
Is selling life insurance taxable?
In some cases, the lump sum payment from a life insurance settlement may have tax implications, depending on the amount received and premiums paid into the policy.
What is a viatical settlement?
A viatical settlement is similar to a life settlement but typically involves someone with a terminal illness who sells their life insurance policy for immediate cash.
Your Next Steps
If you want to sell your life insurance policy or determine whether you may qualify for a life settlement, consider speaking with a licensed insurance professional or a reputable life settlement broker. They can review your policy type, health information, and financial goals to help you understand available options.
Reviewed by a licensed insurance professional. Policies, underwriting rules, and settlement eligibility vary by state and insurance carrier.
Last Updated on March 13, 2026 by Sonny O'Steen
