Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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Life Insurance SettlementA life insurance settlement occurs when the owner of a life insurance policy sells the policy to a third party for cash. Usually this sale will be for more than what the person can get from the insurance company should they try to cash in the policy, but much less than the actual benefit from the policy.

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This is to ensure that the third party in question will be able to make a profit from the purchase upon the policy holder’s death.

Who buys life insurance policies?

There are two ways that you can sell a life insurance policy. Firstly, you can sell directly to what is called a provider. A provider is a company that has to be licensed by the state where you live if they want to purchase your life insurance policy. They work much like an insurance agency, only in reverse.

They will usually hire a company to assess your health and make a determination of how long you will live after you sell the policy. This may sound morbid, but you have to remember that for this company this is an investment. Much like an insurance company, a provider uses something like an underwriter to get the money to pay the policyholder.

The next option is to use a broker to find a buyer for you. The benefit to using a broker is that they can actually get companies bidding on your life insurance policy, which means you may get a better deal. Of course, you have to pay your broker a percentage of the profits, so it is in their best interest to get you as much money as possible.

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Who sells life insurance policies?

While anyone with a policy can attempt to sell it, the truth is that, in most cases, only the elderly will be able to get a good amount of cash for their policy. Companies that purchase life insurance policies don’t want to wait 40 or 50 years to profit from their investment so they are going to choose high risk individuals to purchase from; high risk meaning those with a risk of dying soon.

People over the age of 65 and the terminally ill are typically the only people that these companies will purchase life insurance policies from.

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How do I decide if I should sell my life insurance policy?

There are two things that you have to consider before you attempt to sell your life insurance police.

  • The first thing is that you need to ensure that you have the right kind of life insurance policy. While some companies will purchase term life insurance policies if the criteria are right, (meaning the person has received the bad news that they will die well before the term policy expires), in most cases they require the policyholder to have a whole life insurance policy.
  • A whole life insurance policy doesn’t expire so if you are 75 and you manage to live until you are 101, the policy will still pay out; it’s guaranteed.

The other catch is that, unlike the company that purchases your life insurance policy, you are going to have to pay taxes on the money that they give you. Why is that? Well, the government is going to consider the cash you receive as income. As the beneficiaries of your policy, the company that purchases it gets the money tax free, even if the pay out is a million dollars.

Lastly, once you sell the policy it doesn’t belong to you in any way, shape or form. If you become uncomfortable with the idea that strangers are going to benefit from your death, too bad, legally they own the policy and can name any beneficiary that they want; namely themselves. You can’t petition the insurance commission to remove your name or ask the insurance company to. It just isn’t possible; this is a permanent transaction.

The bottom line is that if you find yourself with an insurance policy that you no longer need, you don’t have to shrug off the money you have spent. If you are under the age of 65, talk to your insurance agent about cashing in your policy. If you’ve had it for more than 10 years then it probably has some value for you. If you are over 65 find a company or a broker to help you to get the best deal for your life insurance policy.

You can use the money to travel, pay bills, buy a boat, a car, a home, whatever it is you want; the choice is yours. If you are in the market for life insurance you can compare rates from multiple companies side by side and get the best options for you.

Use the free tool and your zip code to obtain life insurance quotes now!