You no longer need the life insurance coverage
When the reason you bought a policy no longer applies, keeping it is a cost with no benefit. Find out whether it has value on the secondary market.
Life insurance is bought for a reason: to protect a mortgage, provide for children, replace income, fund a buy-sell agreement, or cover an estate tax liability. When those reasons go away — the mortgage is paid, the children are independent, the business is sold, the estate plan has changed — the policy becomes an ongoing expense with no clear purpose.
The most common situations
The children are grown and financially independent. The mortgage is paid off. A spouse has predeceased the insured. A business that required key-person or buy-sell coverage has been sold or wound down. An estate tax that the policy was meant to cover no longer applies because the estate has shrunk or the law has changed. In each case, the original reason for the policy is gone.
What most people do — and what it costs them
Most people in this situation either keep paying premiums on a policy they no longer need, or surrender it for its cash value. Surrendering is better than lapsing, but the cash surrender value is set by the insurance company and reflects only the policy's internal account value — not what a buyer in the secondary market would pay for the right to collect the death benefit.
What the secondary market pays for
A life settlement buyer is not buying the policy's cash value. They are buying the right to collect the death benefit when the insured passes. The price they pay depends on the face amount, the insured's age and health, and the type of policy. For a policyholder who is 65 or older with a face amount of $100,000 or more, the secondary market often pays several times the cash surrender value.
What to consider before selling
Selling ends the coverage permanently. If your beneficiaries still have any financial dependence on the death benefit — even indirectly — that needs to be weighed. Proceeds may be partially taxable. And if your health has changed significantly since the policy was issued, that may actually increase what buyers will pay, which is worth knowing before you decide.
The policy may be worth more than you think.
The cash surrender value is the floor, not the ceiling. Find out what buyers would pay before you surrender or let it lapse.
One conversation, no obligation.
Tell us about the policy and we will tell you honestly whether it is likely to qualify and what the realistic range looks like.