According to a LISA survey, 55% of seniors aged 65 and older don’t even know they can sell a life insurance policy. The result: every year, hundreds of thousands of seniors let policies lapse or surrender them to the insurance company for pennies on the dollar — not because they want to, but because nobody told them there’s another way. It’s called a life settlement, and it means selling your policy to a third-party buyer for a lump-sum cash payment that’s almost always far more than the insurance company would give you.

We put together this guide to walk you through the whole process so there are no surprises. If you’d rather start with the short version, here’s our step-by-step selling guide.

Step 1: Determine If You Qualify

Not every policy qualifies. The general eligibility criteria look like this:

Age: The insured is typically 65 or older (though younger applicants with significant health changes may qualify)
Policy type: Universal life, whole life, variable life, or convertible term life
Face value: Most buyers look for policies with a death benefit of $100,000 or more
Health: Any change in health since the policy was issued generally increases the policy’s market value

A lot of people assume you have to be seriously ill. That’s not the case. You just need a qualifying policy and a reason you no longer want or need the coverage.

We hear the same reasons over and over from the families we work with: the kids are grown and the mortgage is paid off, so the death benefit doesn’t serve its original purpose anymore. Or premiums have crept up to the point where they’re squeezing a fixed retirement budget — especially for seniors over 70 when the cost of keeping a policy climbs steeply. Some folks would simply rather have the cash now — for medical bills, long-term care, home modifications, travel, whatever matters to them. And quite a few come to us because the policy is about to lapse and they’d hate to walk away with nothing after paying premiums for decades.

Step 2: Choose the Right Broker

This is honestly the most important decision you’ll make in the whole process, and it’s where a lot of people get it wrong. There are two paths:

Selling directly to a buyer

You contact a life settlement company or investment firm and they make you an offer. Sounds simple enough, but there’s a catch — that company is representing its own interests, not yours. Their goal is to acquire your policy as cheaply as possible, and since you’re only getting one number, you have no way of knowing whether it’s fair.

Working with a fiduciary broker

A licensed life settlement broker works for you, the seller. They have a legal obligation to act in your best interest. Instead of giving you a single take-it-or-leave-it offer, the broker shops your policy to a whole network of institutional buyers and lets them compete against each other for the right to buy it.

We can’t stress this enough: work with a broker, not a direct buyer. We’ve seen cases where the difference is $30,000, $50,000, even more. For a deeper look at the types of companies in this space, see our guide on how to choose the right life settlement company.

What to look for in a broker:

Licensed in your state as a life settlement broker
Fiduciary obligation to act in your best interest
Does not buy policies themselves — a broker who buys policies has a conflict of interest
Transparent about fees — broker commissions typically come from the sale proceeds and are disclosed before you agree to anything
No upfront costs — you should never pay anything out of pocket to explore a life settlement

Step 3: Submit Your Policy Information

Your broker will need a few pieces of information to get started — nothing invasive at this stage:

A copy of your life insurance policy (or at least the policy type, face value, and issuing company)
The insured’s date of birth
General health information
Whether there have been any significant health changes since the policy was issued

That’s it. This first look is free and usually takes just a few days. If your policy looks like a good candidate, your broker will explain what comes next.

Step 4: Medical Underwriting

Now comes the part that sounds more intimidating than it actually is: life expectancy underwriting. Your broker will request your medical records (with your permission) and send them to independent life expectancy providers — third-party firms that have no stake in the outcome.

These providers look at the insured’s medical history, current health, and actuarial data to estimate life expectancy. Why does this matter so much? Because it’s the single biggest factor that drives what a buyer will pay. A shorter life expectancy means the buyer collects the death benefit sooner and pays fewer premiums in the meantime, so they’re willing to pay more up front.

The whole thing takes about 2–3 weeks, and you don’t have to do much beyond signing the authorization forms. Your broker handles the logistics.

Step 5: Marketing and Bidding

Once the life expectancy report comes back, your broker takes your policy to market. They present it to a network of institutional buyers — pension funds, hedge funds, and firms that specialize in life settlement investments — and invite competing bids.

Think of it like selling a house. One offer is just one number. Five or six offers competing against each other? That’s how you find out what something is really worth. Skipping this step is exactly why selling directly to a single buyer leaves so much money on the table.

Expect the bidding to take roughly 2–4 weeks.

Step 6: Review Your Offers

Your broker brings every offer back to you and walks you through the numbers. For each one, you’ll see:

The cash amount you’ll receive
Any broker commissions or fees (deducted from the proceeds)
The net amount you’ll actually receive after all costs
The buyer’s identity and reputation

You are under no obligation to accept any offer. If the numbers don’t work for you, you can walk away with no cost and no penalty. Your policy stays in force as if nothing happened.

Step 7: Closing and Payment

If you accept an offer, the closing process begins:

You sign the necessary paperwork (purchase agreement, change of ownership and beneficiary forms)
The funds are placed in an escrow account by the buyer
The insurance company processes the ownership change
Once the transfer is confirmed, the escrow agent releases the funds to you

You typically receive payment within 2–4 weeks of accepting an offer. The total process from start to payment is usually 60–90 days.

After closing, you have no further obligations — though you’ll want to understand the tax implications of your life settlement before tax season. The buyer pays all future premiums. You receive your cash and you’re done.

How Much Can You Get for a Life Insurance Policy?

Every policy is different, but these ranges give you a ballpark:

Average payout: approximately 20% of the face value (so a $500,000 policy might return around $100,000)
Range: payouts typically fall between 10% and 25% of the face value for standard cases, depending on the insured’s age, health, policy type, and premiums. Payouts can reach 50% or more for individuals with shorter life expectancies
Compared to surrender: LISA data shows life settlement payouts average 4–7× the cash surrender value, reaching a record 6.5× in 2024

The best way to know what your specific policy is worth is to get an estimate. It’s free, it takes a few minutes, and there’s no obligation.

Common Mistakes When Selling Life Insurance

Letting a policy lapse without checking its value. Industry data shows 85–88% of life insurance policies never pay a death benefit — they’re surrendered, lapsed, or expired. If you stop paying premiums and the policy lapses, you get nothing. Even if you can’t afford the premiums, check the life settlement market first — your policy may be worth significant money.

Surrendering to the insurance company without exploring alternatives. The cash surrender value is almost always the lowest payout option. Understand the difference between a life settlement and surrendering your policy before you decide. Insurance companies are not required to tell you about the life settlement market.

Selling directly to a buyer without a broker. A single buyer has no incentive to offer you a fair price. A broker creates competition and fights for the highest offer.

Waiting too long on a convertible term policy. If you have a term policy with a conversion option, that option may have an expiration date. Once it expires, the policy becomes worthless. Learn more about selling a term life insurance policy and check your conversion deadline.

Your Next Step

The whole process boils down to a few steps: make sure you qualify, pick a fiduciary broker who works for you (not a buyer), let them run a competitive bidding process, and decide whether the numbers make sense for your life.

There’s no cost to find out. The broker’s commission comes out of the sale proceeds if you decide to move forward — you never write a check.

Citizens Life Group helps seniors get the most from policies they no longer need. Take a look at real settlement results from people who’ve been through this process. Get a free estimate or call (321) 270-0279 to talk with our team.

Sources

Life Insurance Settlement Association — Awareness Survey — The source of the widely cited finding that 55% of seniors aged 65+ are unaware that life settlements exist as an option.
Life Insurance Settlement Association Annual Market Data Survey (2024) — Reports average of 9 bids per closed policy across 21 licensed providers, with closings spread across 12 different providers, illustrating the competitive bidding dynamics a seller should expect from a fiduciary broker.
NAIC Life Settlement Model Act (MDL-697) and NCOIL Life Settlements Model Act — The two model acts that most state life settlement statutes follow, covering licensing, disclosures, rescission periods, and broker fiduciary duty.
Securities and Exchange Commission — Investor Bulletin on Life Settlements — Plain-language guidance on what sellers should expect in a life settlement transaction and red flags to watch for.
Internal Revenue Service Revenue Ruling 2009-13 and Revenue Ruling 2020-05 — Federal tax framework that determines the seller’s after-tax net from a life settlement.
Florida Statutes Chapter 626 Part X (Viatical Settlement Act) — Florida’s home-state statute, representative of the regulatory protections a seller receives in any of the 43 regulated states.
Insurance Studies Institute (2010) — Empirical finding that 90% of seniors who let a policy lapse would have considered selling if they had known settlements were an option. Primary-source domain no longer resolving; archived version available via the Wayback Machine.

How to Sell Life Insurance for Cash