Can You Sell a Term Life Insurance Policy? (2026 Guide)

Can you sell a term life insurance policy? Yes, in certain situations. Whether your specific policy can be sold depends on two things: whether it is convertible to a permanent policy, and your current health.

There are two real paths to selling a term life insurance policy:

1. Convertible term. If your policy includes a conversion privilege, you can convert it to a permanent policy and sell that permanent policy through a life settlement for a lump-sum cash payment. This is the most common path and usually the most valuable.
2. Non-convertible term, with a significant health change. Standard (non-convertible) term is harder to sell because it expires on a fixed date with no cash value. But if your health has declined since the policy was issued and there are enough years left in the level term, the math can work for a buyer. This path is less common, but real, especially for chronic or terminal conditions.

This guide walks through both paths, how each one works, what payouts typically look like, and what to do if your policy does not qualify either way.

Reviewed by a licensed life settlement professional. Last updated May 7, 2026.

Jump to what you need

Quick answer: which life insurance policies can be sold?

Here is a plain-English summary of which life insurance policies have a market and which do not.

Most policyholders with convertible term will use the convert-and-sell path described below. If your policy is non-convertible, jump to What if your term life policy is not convertible? for the health-driven exception and your other options.

Why standard term is harder to sell, and when it isn’t

A life settlement is the sale of a life insurance policy to a third-party buyer for a lump-sum cash payment. The buyer takes over the premiums, becomes the policy owner, and collects the death benefit when the insured passes away.

That math only works if the buyer expects to collect the death benefit before the policy expires.

Term life insurance is the simplest and most affordable kind of life insurance. You pay a fixed premium for a set period (the “term”), and if you pass away during the term, your beneficiaries receive the death benefit. Common terms are 10, 15, 20, 25, and 30 years.

The trade-off for low premiums is that term policies have no cash value, and coverage ends on a specific expiration date. If the insured outlives the term, the buyer collects nothing. For most healthy seniors with a non-convertible term policy, that risk is too high and the policy cannot be sold.

But it is not a hard rule. Two factors can flip the buyer’s math in the seller’s favor:

• A significant health change since the policy was issued. A shorter life expectancy means the buyer expects the death benefit sooner, often before the term ends.
• Enough years left in the level term. If your remaining term is longer than your expected life expectancy, a buyer may still be willing to take the policy.

When both are true, even a non-convertible term policy can sometimes be sold. According to the Illinois Department of Insurance consumer guide, viatical settlement providers “can buy almost any type of life insurance policy, including term, whole and universal life.” That is the regulator’s way of saying term is not categorically excluded, even when conversion is not an option.

The exception: convertible term life

Many term policies include a conversion privilege (sometimes labeled a conversion rider). It gives you the contractual right to swap your term policy for a permanent policy, usually whole life or universal life, without a new medical exam and without new health questions.

A permanent policy has a death benefit that does not expire, which makes it a real, sellable asset. The strategy:

1. Confirm your term policy includes a conversion privilege and the deadline has not passed.
2. Convert the term policy to a permanent policy.
3. Sell the new permanent policy through a life settlement for a lump-sum payment.

Your insurance company has to honor the conversion if you exercise it on time, even if your health has changed since you first bought the policy. A health change since the policy was issued can actually increase the settlement value, which is what makes this strategy so valuable for older policyholders.

Want to gauge what your policy might be worth before converting? Check our overview of how much a policy is typically worth or request a free estimate. Free, no obligation.

How a convert-and-sell works, step by step

If you think you have a convertible term policy, here is the practical process for turning it into cash.

Step 1: Locate your conversion privilege

Pull out your policy documents and look for a section titled “Conversion Privilege,” “Conversion Option,” or “Right to Convert.” Can’t find the paperwork? Call your insurer and ask: “Does my policy include a conversion privilege, and what is the deadline?”

Step 2: Confirm the conversion deadline

Most conversion windows have a hard cutoff. Common limits:

• A specific age, often 65 or 70
• A set number of years from the policy start date
• Before the level-premium term ends, not after

Once the deadline passes, the conversion right is gone for good.

Step 3: Pre-qualify the policy before you convert

This is the most important step, and the one most people skip. Permanent policy premiums are typically 5 to 15 times higher than term premiums (Conning, 2025). A licensed broker can run an estimate based on your age, health, and the policy’s terms before you commit.

Step 4: Convert the term policy

If the numbers work, you exercise the conversion privilege through your insurance company. The paperwork is usually straightforward, and the new policy uses your original health rating, not a new medical exam.

Step 5: Have the new permanent policy appraised

A licensed broker shops the policy to multiple buyers. Brokered transactions average around nine competitive bids per closed policy across 20+ licensed providers (LISA 2024 Annual Market Data Survey).

Step 6: Review competitive bids

You receive offers in writing and are never obligated to accept any of them. Most states require a written disclosure of all commissions and fees before you sign.

Step 7: Close and receive payment

If you accept, the buyer takes over premiums and you typically receive funds within 30 to 60 days. State law also gives you a rescission period (often 15 to 30 days) to reverse the sale at no cost.

How much can you sell a term life policy for?

Payouts depend on age, health, policy size, and how the converted policy is structured. Industry-wide averages from the Life Insurance Settlement Association’s 2024 Annual Market Data Survey are a useful starting point:

• The industry paid $601 million to consumers across 2,699 transactions in 2024.
• The average seller received 6.5 times their policy’s cash surrender value, the highest multiple on record.
• The industry average payout was approximately 20 percent of the policy’s face value.
• Sellers received about $511 million more in 2024 than they would have by surrendering their policies to the insurance carrier.

For convertible term policies, the math is unusual because term has zero cash surrender value. Anything you receive is more than you would get by letting the policy expire. An estimated 85 to 88 percent of life insurance policies never pay a death benefit (LISA), so for convertible term that meets the qualification bar, a settlement is one of the few ways to recover real value before the term runs out.

What drives the offer

When buyers price your converted policy, they look at:

• Age. The average insured at settlement is around 76 (LISA 2024). Older policyholders generally see higher offers because the buyer’s expected hold time is shorter.
• Health. A decline in health since the policy was issued increases the value of a settlement. This is counter-intuitive, but it is consistent with how the secondary market works.
• Premium burden. Lower premiums on the converted policy mean a higher net return for the buyer, which means a higher offer for you.
• Policy size. Most buyers prefer a face value of $100,000 or higher. Smaller policies are sometimes settleable but pricing tends to be weaker.
• Insurance carrier rating. Buyers want confidence the carrier will pay the claim. Higher-rated carriers (AM Best, S&P, Moody’s) typically attract more interest.

When this strategy makes the most sense

A convert-and-sell strategy is worth exploring if most of the following are true for you:

• You are at least 65 years old, and ideally 70 or older
• Your term policy includes a conversion privilege that has not expired
• The face value is $100,000 or more
• You no longer need the death benefit, or you can no longer afford rising premiums
• Your health has changed since the policy was issued

If two or more of those describe your situation, it is worth getting a free estimate before your conversion deadline closes.

What if your term life policy is not convertible?

A non-convertible term policy is harder to sell than a convertible one, but you still have several real options. Some put cash in your pocket directly, others reduce your costs.

A life settlement on a non-convertible term policy is sometimes possible

If your health has changed meaningfully since the policy was issued, especially with a chronic or terminal condition, a buyer may purchase the term policy outright with no conversion. The buyer’s math has to work: your life expectancy needs to be shorter than the remaining level term, and the premium burden between today and the expected payout has to be acceptable.

Rough thresholds, recognizing every situation is different:

• Under age 65: typically requires a life-threatening or terminal diagnosis
• Ages 65 to 74: typically requires a serious health impairment
• Ages 75 to 79: chronic health conditions may be enough
• Age 80 and over: qualification is more likely, with the offer depending heavily on the policy’s premium costs

These are guidelines, not rules. The only reliable way to know if your specific policy and health profile qualify is to have a licensed broker run an estimate. There is no cost to find out.

Viatical settlement (terminal illness)

A viatical settlement is a life settlement for a policyholder with a terminal illness, typically a life expectancy under two years. Viaticals can apply to most policy types, including non-convertible term, and the proceeds are usually tax-free at the federal level under IRC § 101(g). See our guide on life settlements vs. viatical settlements.

Accelerated death benefit (ADB) rider

Many term policies include an ADB rider that pays a portion of the death benefit early if you are diagnosed with a terminal or chronic illness. Check your policy document or call your insurer to confirm.

Other options

• Sell other permanent policies you own. A whole life or universal life policy you also own may be settleable on its own, even if the term policy is not.
• Buy a new policy. Practical only if you are still under 65 and in good health.
• Let the term policy expire. There is no penalty for doing nothing. For many people who bought term coverage to protect a mortgage or young children, the policy did its job and letting it end is the right call.

For the broader picture of choices when a term policy is approaching expiration, see what happens when term life insurance expires.

Tax treatment, in plain terms

When you sell a permanent policy through a life settlement, the IRS taxes the proceeds in three tiers (Revenue Ruling 2009-13, refined by the Tax Cuts and Jobs Act of 2017):

1. Cumulative premiums you paid come back to you tax-free.
2. Anything above premiums, up to the policy’s cash surrender value, is taxed as ordinary income.
3. Anything above cash surrender value is taxed at the lower long-term capital gains rate.

Revenue Ruling 2020-05 confirmed that even term life policies have a tax basis equal to the cumulative premiums paid.

For more detail, see our deeper guide on life settlement tax treatment. Anyone considering a sale should run the numbers with their own CPA.

Two realistic examples

Here is how the math works in two common cases. The numbers are illustrative but consistent with industry averages.

Example 1: Convertible term

Margaret is 73. She owns a $500,000 convertible term policy that is set to expire in three years. Her health has declined since the policy was issued, and she no longer needs the coverage. Her real choices are:

• Let the policy expire: Receives $0. Twenty years of premium payments are gone.
• Convert and sell through a life settlement: Converts to a universal life policy and sells it on the secondary market.

Based on her age and health, the converted policy attracts competitive bids from multiple licensed buyers. She accepts an offer and nets a lump sum of approximately $95,000 after commissions.

Example 2: Non-convertible term, with a serious health change

Robert is 76. He owns a $300,000 non-convertible term policy with 12 years remaining. Last year he was diagnosed with a serious illness, and his doctor’s life expectancy estimate is around four years.

His policy is not convertible, but the buyer’s math still works: his life expectancy is well inside the remaining 12-year term. After medical underwriting and competitive bidding, Robert receives an offer of approximately $40,000 after commissions.

Without the life settlement, Robert would have kept paying premiums on a policy he no longer needed, with nothing to recover. With it, he has cash for medical care and time with his family.

The point of these examples is not the specific dollar amounts, which vary case by case. The point is that something is almost always better than nothing, and most policyholders never learn this option exists. An estimated 55 percent of seniors aged 65 and older are unaware life settlements exist (LISA consumer awareness survey).

Red flags to watch for

If you do explore selling your policy, the secondary market has a few well-documented bad actors. Watch for these warning signs:

• A single take-it-or-leave-it offer. Legitimate brokers shop your policy to multiple licensed buyers and present every offer.
• Urgency tactics (“accept today” deadlines). A real offer holds for at least several days. Pressure usually means a buyer is trying to keep your policy off the open market, where competitive bidding pushes the price up.
• Vague compensation disclosures. State law in most jurisdictions requires a written breakdown of every commission and fee before you sign.
• No mention of your alternatives. A licensed broker has a fiduciary duty in many states to discuss options like accelerated death benefits, surrender, and reduced paid-up coverage.
• Asking for an upfront fee. No legitimate buyer or broker should require you to pay anything before you accept an offer.

The Financial Industry Regulatory Authority (FINRA) and the National Association of Insurance Commissioners (NAIC) both publish consumer guidance on these red flags. Many state insurance departments do as well, including the Texas Department of Insurance and the New York Department of Financial Services.

What to do this week

If you have a term life policy and you suspect it might be convertible, three steps are worth taking right now:

1. Find your policy documents and locate the conversion privilege language.
2. Call your insurance company and ask for the conversion deadline in writing.
3. Get a free, no-obligation estimate before you commit to anything. The estimate is information, and it costs nothing.

Acting before the conversion deadline is the difference between a real cash payout and walking away with nothing. You can also see our eligibility overview to confirm whether the basic criteria fit your situation.

Frequently asked questions

Can you cash out a term life insurance policy?

No. Term life insurance has no cash value to cash out. You can sometimes sell a term policy through a life settlement, but only if the policy is convertible to a permanent policy and you complete the conversion first.

Can I sell my term life policy without converting it?

Sometimes, yes. Non-convertible term is harder to sell than convertible term, but it can still qualify if your health has changed meaningfully since the policy was issued and the remaining term is long enough. A buyer needs to expect to collect the death benefit before the policy expires, so life expectancy compared with remaining term is the key factor. Per the Illinois Department of Insurance, viatical settlement providers can purchase almost any policy type, including term.

Does term life insurance have any value at the end of the term?

Usually no. If the insured outlives the term and the policy was not converted to permanent coverage, the policy expires with no payout.

How much can I get for selling a term life policy?

After conversion to a permanent policy, the average life settlement payout is about 20 percent of the policy’s face value (LISA 2024). On a $500,000 policy that can mean roughly $50,000 to $125,000. The actual figure depends on age, health, and the new permanent policy’s premiums.

What is the conversion deadline on most term policies?

It varies by policy. Common limits are a specific age (often 65 or 70), a set number of years from the start of the policy, or before the level-premium term ends. Your insurance company can confirm your exact deadline in writing.

Can I sell my term life if I am under 65?

Usually only if you have a serious or terminal illness, through a viatical settlement. Standard life settlements typically require the insured to be at least 65, and most closed transactions involve insureds in their 70s and 80s.

Is selling a term life policy taxable?

The proceeds may be partly taxable. Under current IRS rules, payments up to the total premiums you paid come back tax-free. Amounts above that are taxed as ordinary income or long-term capital gains depending on the policy’s cash surrender value.

How long does the convert-and-sell process take?

From first call to funds in your account, the process typically takes 60 to 120 days. Conversion paperwork takes the longest. Once converted, most settlements close within 30 to 60 days of accepting an offer.

Sources

• LISA (Life Insurance Settlement Association) 2024 Annual Market Data Collection Survey
• National Association of Insurance Commissioners (NAIC) Viatical Settlements Model Act
• Financial Industry Regulatory Authority (FINRA) Investor Alert on Life Settlements
• IRS Revenue Ruling 2009-13; Revenue Ruling 2020-05; Tax Cuts and Jobs Act of 2017
• Florida Statutes § 626.9911 et seq.; Florida Office of Insurance Regulation
• Texas Department of Insurance, “Can I sell my life insurance policy?” consumer guide
• New York Department of Financial Services, Consumer Information Booklet on life settlements
• Illinois Department of Insurance, Viatical Settlements consumer guide
• Conning, 2025 Life Settlements Strategic Study