Texas Life Settlements
Life Settlements in Texas
Texas has the third-largest senior population in the United States — more than 3.5 million residents aged 65 and older — and it is one of the fastest-growing retiree markets in the country. With no state income tax and a strong regulatory framework, the Lone Star State offers significant advantages for policyholders looking to sell their life insurance for more than its cash surrender value.
Why Texas Is a Key Life Settlement Market
Texas consistently ranks among the top three states in the country for life settlement activity. The reasons go beyond sheer population size: Texas combines a massive and rapidly growing senior population, one of the highest rates of life insurance ownership in the nation, and a business-friendly environment with no state income tax — meaning life settlement proceeds are not subject to state-level taxation.
For Texas seniors who own life insurance policies they no longer need or can no longer afford, a life settlement offers a way to convert that asset into a significant cash payment — according to the Life Insurance Settlement Association (LISA), typically several times more than the cash surrender value your insurance company would offer. Rather than letting a policy lapse or surrendering it for pennies on the dollar, Texas policyholders can tap into a competitive marketplace of institutional buyers. Browse real client results to see what others have received.
Texas is one of the largest insurance markets in the United States. Over 3.5 million residents are 65 and older. Texas has no state personal income tax and codifies broker fiduciary duty to the seller in Texas Insurance Code Chapter 1111A § 1111A.003. Community property rules apply to policies acquired during marriage.
Texas by the Numbers
The scale of Texas's life settlement market reflects the state's enormous size, rapid growth, and unique financial advantages.
3.5M+
Texas residents aged 65 and older — the 3rd largest and one of the fastest-growing senior populations in the U.S.
0%
Texas state income tax rate — life settlement proceeds are not subject to any state income tax
4–7×
Typical life settlement payout vs. the cash surrender value your insurance company would offer
Why Texas Seniors Sell Their Life Insurance
Premiums are straining retirement budgets
Texas may not have a state income tax, but property taxes and healthcare costs are among the highest in the nation. Many seniors find that premium payments are eating into fixed incomes that need to stretch further.
The coverage is no longer needed
Children are grown, mortgages are paid off, a business has been sold, or a spouse has passed. The original reason for the policy no longer applies — but the policy still has substantial market value.
Healthcare and long-term care costs
Even with Medicare, out-of-pocket medical costs can be significant in Texas. A life settlement can provide tens or hundreds of thousands of dollars to cover medical expenses, home care, or assisted living.
Funding retirement in the Lone Star State
Whether it's home renovations, travel, helping grandchildren with education, or simply enjoying retirement, a life settlement puts cash in your hands today rather than leaving value locked in a policy.
Estate planning has changed
Beneficiaries have changed, financial priorities have shifted, or an advisor has identified a better use for the funds currently going to premium payments. Texas community property laws may also factor into estate decisions.
Taking advantage of no state income tax
Texas residents who sell their life insurance policies benefit from having no state income tax applied to the proceeds. While federal taxes may still apply, the absence of state tax is a meaningful financial advantage.
Texas Life Settlement Laws & Regulations
Life settlements in Texas are governed by Texas Insurance Code Chapter 1111A, which establishes a comprehensive regulatory framework for the life settlement industry. This legislation was designed to protect Texas policyholders while maintaining a fair, transparent, and competitive marketplace.
The Texas Department of Insurance (TDI) oversees all life settlement activity in the state, including the licensing of brokers and providers, review of transaction disclosures, and enforcement of consumer protection rules. Texas also imposes a 2-year waiting period on most policies (aligned with the policy's contestability period), with important exceptions designed to protect seniors in specific life circumstances.
Licensing Requirements
All life settlement brokers and providers operating in Texas must be licensed by the Texas Department of Insurance (TDI). This ensures that anyone involved in your transaction has been vetted and is subject to ongoing regulatory oversight. Working with an unlicensed entity is not only risky — it's illegal under Texas law.
Mandatory Disclosures
Texas law requires that you receive clear, written disclosures before signing any life settlement agreement. These disclosures must include the estimated cash surrender value, the offer amount, any fees or commissions, the buyer's identity, and your rights as the seller — including your right to rescind the contract.
15-Day Rescission Period
Under Texas Insurance Code Chapter 1111A, you have a minimum of 15 days after signing the life settlement contract to change your mind and cancel the transaction — no questions asked. This cooling-off period gives you time to reconsider, consult with family or advisors, and make sure you're comfortable with your decision.
2-Year Waiting Period
Texas generally requires that a life insurance policy be in force for at least 2 years before it can be sold in a life settlement — aligned with the standard contestability period. However, there are important exceptions: the waiting period does not apply if the policyholder has been diagnosed with a terminal illness, has gone through a divorce or death of a spouse, has retired or become disabled, or has filed for bankruptcy. These exceptions ensure that Texans facing major life changes are not locked out of the market.
Anti-Fraud Provisions
The Texas life settlement statute includes specific anti-fraud provisions. It is illegal to misrepresent information, coerce policyholders, or engage in stranger-originated life insurance (STOLI) schemes in the state of Texas. The TDI actively investigates complaints and enforces these protections.
Privacy Protections
Your personal and medical information is protected under Texas law. Buyers, brokers, and providers must handle all personal health information in accordance with HIPAA and state privacy regulations. Your information cannot be shared outside of what is strictly necessary for the transaction.
Texas Consumer Protections at a Glance
A Closer Look at Texas Insurance Code Chapter 1111A
The Texas life settlement statute was rewritten in 2011 to adopt the NCOIL Life Settlements Model Act with Texas-specific amendments. Four provisions shape what a Texas seller should expect. For how Texas compares to other states, see our state-by-state life settlement rules reference, and for the federal three-tier tax framework see our life settlement tax treatment guide.
Broker fiduciary duty is explicit
Chapter 1111A § 1111A.003 expressly states that a Texas life settlement broker owes a fiduciary duty to the owner (the seller). This is a legal term of art: the broker's duty of loyalty runs to you, not to the buyer or to the broker's own economic interests. Violations can trigger both TDI enforcement and private causes of action.
Seven statutory exceptions to the 2-year waiting period
Under Texas Insurance Code § 1111A.014, a life settlement contract generally may not be entered into within 2 years of policy issuance. Exceptions include: policies issued on the exercise of conversion rights from a group or term policy, plus cases where the owner certifies terminal or chronic illness, divorce, disability, retirement, loss of a spouse, or bankruptcy. If any of these apply, a newer policy may still be settleable.
No state income tax on proceeds
Texas does not impose a state personal income tax. The federal three-tier framework under Revenue Ruling 2020-05 still applies (basis, ordinary income, capital gains), but Texas adds no state-level tax on top. A settlement that generates, say, $400,000 in gain above basis gets taxed federally but nothing is carved off at the state level, unlike California or New York.
Community property considerations
Texas is a community property state. A policy acquired during marriage with community funds is generally community property, meaning both spouses have ownership rights regardless of whose name is on the policy. In practice, Texas brokers require both spouses' signatures on the settlement contract when a policy was acquired during marriage. This prevents a later spousal-rights claim and is a statute-of-fraud-level protection the buyer will insist on.
How to File a Complaint with the TDI
If something goes wrong in a Texas life settlement (a broker you cannot reach, an offer that was never actually communicated to you, pressure tactics, missing disclosures), file a complaint directly with the Texas Department of Insurance Consumer Complaint system or call TDI Consumer Help at 1-800-252-3439. Include the licensee's name, the policy number, dates of all written disclosures, and copies of every offer you received.
A Texas example
Consider Ray, age 74, a retired oilfield engineer in Midland with a $1.2 million universal life policy issued in 2001. Current CSV is about $48,000, and the policy is approaching a premium re-pricing cliff where the carrier's cost-of-insurance charges will push the annual premium from $14,000 to an estimated $28,000 next year. Ray and his wife Dana are considering their options and have been contacted by a direct buyer offering $140,000 (about 12% of face value) with a seven-day acceptance window.
Under a fiduciary-brokered Texas sale, Ray's policy is submitted to roughly 15 licensed providers. Six return competing offers ranging from $225,000 to $310,000. The final accepted offer of $285,000 reflects the broker's ability to negotiate across multiple bidders. Because Texas has no state income tax and Ray's cumulative premium basis is approximately $220,000, the federal tax treatment under Revenue Ruling 2009-13 (as updated by the TCJA) limits the ordinary-income portion to a small slice between basis and CSV and treats the amount above CSV as long-term capital gains. Dana countersigns the settlement under Texas community property law. Ray pockets roughly $235,000 after federal taxes and broker commissions.
Illustrative hypothetical. Individual outcomes vary by policy, health, and market conditions.
Texas-Only FAQs
Does Texas community property law affect a life settlement?
Often, yes. Under Texas Family Code § 3.002, property acquired during marriage with community funds is generally community property, meaning both spouses have an interest in the asset. In life settlement practice, most Texas buyers require both spouses to sign the settlement contract when the policy was acquired during marriage. This requirement is about protecting the buyer from a later community-property claim by the non-owner spouse, and it is a settlement-industry standard in Texas even when the statute does not literally require it.
Are life settlement proceeds subject to Texas state income tax?
No. Texas has no state personal income tax, so life settlement proceeds are not subject to any state-level income tax. Federal taxation under the three-tier framework in Revenue Ruling 2009-13 (as updated by the TCJA and extended by Rev. Rul. 2020-05) still applies: tax-free return of basis up to cumulative premiums paid, ordinary income between basis and cash surrender value, and long-term capital gains above CSV. But Texas does not add its own layer.
Does the Texas 2-year waiting period really have seven exceptions?
Yes. Under Texas Insurance Code § 1111A.014, the 2-year waiting period does not apply if the insured has been diagnosed with a terminal illness (LE under 24 months), is chronically ill under IRS § 7702B, has divorced since the policy was issued, has become disabled, has filed for bankruptcy, has lost a spouse, has retired, or holds a policy issued on exercise of conversion rights from a group or term policy. If any of these apply, the policy may be settleable within the 2-year window.
What if my Texas policy was issued when I lived in another state?
The governing factor for the waiting period, rescission period, and disclosure requirements is where you reside at the time of sale, not where the policy was issued. A Texas resident selling a policy issued in Illinois follows Texas law for the transaction itself, though the insurance carrier's home-state regulation still governs the underwriting of the original policy.
How is a Texas viatical settlement different from a life settlement?
Under Chapter 1111A, a viatical settlement is specifically for insureds with a chronic or terminal illness, typically with a life expectancy of 24 months or less. The key practical differences: viatical settlements often qualify for preferential federal tax treatment (proceeds may be entirely tax-free under IRC § 101(g) for terminal illness), payouts are usually higher as a percentage of face value, and the transaction can close faster. A Texas broker will tell you which category your policy falls under after reviewing your medical records.
How the Life Settlement Process Works in Texas
The process is the same whether you live in Houston, Dallas, San Antonio, Austin, or anywhere else in Texas. Here's what to expect.
Request Your Free Estimate
Fill out our short online form or call us directly. We'll review your policy details — type, face value, and basic health information — and let you know if your policy qualifies. This is free and there is no obligation.
Start your free estimate →Qualification & Review
A licensed life settlement specialist reviews your information and confirms your policy meets market criteria, including verification that it satisfies the Texas 2-year holding requirement (or qualifies for an exception). We'll explain the process, timeline, and answer any questions you have.
Documentation & Underwriting
You provide basic documents — your policy summary, premium statements, and a medical records authorization. Independent life expectancy providers review your medical records to determine your policy's market value. We handle coordinating all of this for you.
Competitive Bidding
Your policy is submitted to a network of qualified institutional buyers. A fiduciary-licensed broker shops your policy competitively to multiple buyers to maximize your payout. This is where working with a broker — rather than a single buyer — makes the biggest difference.
Review Offers & Decide
All offers are presented to you with full transparency — including all fees and commissions, as required by Texas law. You review them at your own pace with zero pressure. You decide whether to accept or decline.
Closing & Payment
If you accept, closing documents are prepared. You sign with the help of a notary, funds go into escrow, and ownership transfers to the buyer. You receive your payment by check or wire transfer. Remember: Texas gives you 15 days after signing to change your mind. And as a Texas resident, your proceeds are not subject to state income tax.
Who Qualifies for a Life Settlement in Texas?
Most Texas seniors who meet the following criteria are good candidates for a life settlement. Not sure if you qualify? Check our qualification requirements page.
Texas resident aged 65 or older
The insured on the policy should be 65+. Age 70+ typically yields the strongest offers from buyers.
Policy face value of $100,000 or more
Larger policies ($250K+) attract the most competitive bids. Policies under $100K rarely qualify in today's market.
Whole life, universal life, or convertible term policy
Permanent life insurance policies are most commonly sold. Convertible term policies may also qualify if the conversion window is still open.
Policy has been in force for at least 2 years
Texas requires a 2-year holding period (aligned with the contestability period). Exceptions apply for terminal illness, divorce, death of spouse, retirement, disability, or bankruptcy.
Health has changed since the policy was issued
This can actually increase your policy's value. Buyers price offers based on life expectancy — changes in health often work in your favor.
The policy is no longer needed or premiums are unaffordable
The most common reasons Texas seniors choose to sell. Don't surrender your policy to the insurance company for a fraction of its worth.
Why Texas Residents Choose Citizens Life Group
Citizens Life Group works with policyholders across the entire state of Texas. We understand the Texas life settlement market and the unique advantages Texas residents have when selling a life insurance policy. Here's why Texas policyholders trust us — read client reviews to hear it in their words.
We Know the Texas Market
Texas is one of the largest insurance markets in the world. We work with buyers and brokers who specialize in Texas policies and understand the regulatory landscape under TDI oversight.
Fiduciary Representation
We connect you with fiduciary-licensed brokers who are legally required to act in your best interest — not the buyer's. Your broker advocates for the highest possible payout on your behalf.
Competitive Bidding Process
Your policy is shopped to a network of institutional buyers. Multiple buyers competing for your policy means higher offers for you — often significantly more than any single buyer would offer alone.
No Upfront Fees — Ever
Our services are completely free to you. We only earn a commission if you accept an offer and close. If you don't sell, you pay nothing. There's zero financial risk to exploring your options.
Full Transparency
Every offer, every fee, every detail is disclosed to you clearly — as required by Texas law and as a matter of our own principles. No hidden costs, no confusing language.
No Pressure, No Rush
We believe in treating every client with patience, dignity, and respect. You make the decision on your timeline. We're here to educate and inform — never to push.
Texas Life Settlement FAQ
Are life settlements legal in Texas?
Yes. Life settlements are fully legal in Texas and are regulated under Texas Insurance Code Chapter 1111A. The Texas Department of Insurance (TDI) oversees all life settlement activity in the state, including the licensing of brokers and providers. Texas has a well-established regulatory framework that protects policyholders throughout the entire process.
What is the rescission period in Texas?
Texas law provides a minimum 15-day rescission period after you sign a life settlement contract. During this time, you can cancel the transaction for any reason and get your policy back, no questions asked. This cooling-off period is designed to give you time to reconsider, consult with family or advisors, and make sure you are comfortable with your decision.
What is the waiting period in Texas?
Texas requires that a life insurance policy be in force for at least 2 years before it can be sold in a life settlement, aligned with the standard contestability period. However, there are important exceptions. The waiting period does not apply if the policyholder has been diagnosed with a terminal illness, has gone through a divorce or death of a spouse, has retired or become disabled, or has filed for bankruptcy. If any of these circumstances apply to you, your policy may qualify even if it is less than 2 years old.
Is there a state income tax advantage for Texas life settlements?
Yes. Texas has no state income tax, which means life settlement proceeds are not subject to any state-level income tax. This is a meaningful financial advantage compared to states that do tax life settlement proceeds. Keep in mind that federal income tax may still apply depending on your cost basis in the policy, so we recommend consulting with a tax professional before completing a transaction.
How long does a life settlement take in Texas?
The entire process typically takes 60 to 90 days from start to payment. This includes qualification, verification of the 2-year holding requirement, underwriting, the competitive bidding process, and closing. Policies that qualify under one of the waiting period exceptions may move through the process on a similar timeline. Complex cases or very large policies may take longer.
Can I sell a term life insurance policy in Texas?
Standard term life policies typically do not qualify for a life settlement because they have no cash value and expire at the end of the term. However, if your term policy has a conversion option that allows you to convert to a permanent (whole life or universal life) policy, it may qualify. The conversion window is critical: if it is still open, the policy may have significant value. We can review your specific policy to determine eligibility.
Do I need an attorney for a life settlement in Texas?
Texas law does not require you to hire an attorney for a life settlement, and most transactions are completed without one. However, you always have the right to consult with an independent attorney at any time during the process. The mandatory disclosure requirements under Texas law are designed to ensure you have full information before making a decision, and the 15-day rescission period provides additional time to seek counsel if you wish.
I live in Texas but my policy was issued in another state. Can I still sell it?
Yes, in most cases. The key factor is where the policyholder resides, not where the policy was originally issued. As a Texas resident, your transaction would be subject to Texas's consumer protections and regulations under Chapter 1111A, regardless of where the policy was purchased.
Serving All of Texas
Citizens Life Group helps policyholders across the entire state of Texas and nationwide. We also serve seniors in Florida, California, New York, and Pennsylvania. Whether you live in a major metro or a smaller community, we can help you explore your options.
Find Out What Your Policy Is Worth in Texas
Our free estimate takes less than 3 minutes. No obligation, no cost, no pressure. A specialist will review your information and let you know honestly whether you qualify — and what your policy could be worth on the open market.