Most policyholders guess that a bigger death benefit means a bigger offer. That guess makes sense. It’s also wrong.
Investors aren’t shopping for the largest policy in the pile. They’re measuring risk, and in this business, risk mostly comes down to time.
Once you see what they’re actually measuring, it’s a lot easier to tell whether your policy is a realistic fit. You’ll also know what a fair offer should look like.
This guide walks through those factors. If anything here raises a question about your specific policy, that’s exactly what a free, no-obligation review is for.
(If you’re an advisor evaluating this for a client rather than your own policy, our piece on where a life settlement expert fits alongside your role and our note on why premium finance cases are starting to crack go into that side of it.)
How Long Will They Be Paying Premiums?
Here’s how a life settlement works.
An investor buys your policy. From that point on, they pay the premiums. When you pass away, they collect the death benefit.
So every extra year you live is another year of premiums the investor has to cover before they see a return. That’s what actually drives every offer: how long the investor expects to keep paying in, not the policy’s face value.
This is why age matters so much.
Most buyers look for candidates who are 65 or older. At that age, actuarial life-expectancy tables give investors a more predictable timeline to work with.
Younger policyholders aren’t automatically ruled out, but a serious health condition usually has to do the work that age would otherwise do.
Health Changes the Math at Any Age
A policyholder in their 50s with a recent, serious diagnosis can look more attractive to an investor than a healthy 70-year-old. Life expectancy is what matters, not age.
When your health takes a turn after a policy is issued, that shift can shorten the expected timeline and raise what an investor is willing to offer.
This is also where a settlement tends to help the most: people dealing with a new health crisis are often sitting on an asset they didn’t know they could turn into cash.
A Quick Example
Say you own a $250,000 permanent policy. Cancel it, and the insurance company might pay you a surrender value of $15,000 to $20,000, with nothing further.
If the same policy qualifies for a life settlement, brokers typically offer land somewhere between 10% and 40% of the death benefit, or roughly $25,000 to $100,000, depending on your age, health, and the policy’s premium cost.
That gap is the whole reason it’s worth checking eligibility before you let a policy lapse or surrender it.
What If Your Policy Is Term Life, Not Permanent?
Here’s something we see constantly: most policyholders who come to us are holding term life insurance, not a permanent policy. That matters, so let’s address it directly.
A standard term life policy has no cash value, and it expires at the end of its term. There’s nothing left for an investor to buy once the term runs out, so on its own, it generally isn’t eligible.
The exception is a convertible term policy: one with a built-in option to convert into permanent coverage before the term ends. If your policy has that option, converting it first is usually the step that opens the door to a settlement.
If you’re not sure whether your term policy is convertible, don’t guess. That’s one of the first things we check for you, at no cost.
Why a High Cash Value Can Actually Work Against You
This part surprises people: a policy with a high cash value is sometimes the harder sell, not the easier one.
Once an investor buys your policy, they take over its ongoing costs. If the surrender charge or cash value is high relative to the death benefit, there’s less room to offer you a meaningful payout and still expect a fair return.
In cases like that, a broker should tell you plainly if a settlement isn’t your best option. That’s part of the fiduciary duty a licensed broker owes you: we’re legally required to act in your best interest, not the buyer’s.
A Quick Checklist: Do You Look Like a Qualified Candidate?
- Age 65 or older, or younger with a health condition that has measurably shortened life expectancy
- A permanent policy (whole or universal life), or a convertible term policy that can still be converted
- A death benefit generally $100,000 or higher (smaller policies are harder to make worthwhile for everyone involved)
- A policy that’s been active for at least two years, past what’s called the contestability period (the window when the insurer could still dispute a claim)
Frequently Asked Questions
Does my age automatically disqualify me?
No. Age 65+ is the most common profile, but younger policyholders with a serious health condition can still qualify. The real factor is life expectancy, not the number on your birthday.
What if I don’t know my policy’s current cash value?
That’s normal, and you don’t need to figure it out alone. Bring us your policy documents, or even just the insurance company’s name and policy number, and we’ll help you find the details during a free review.
Will selling my policy affect my taxes or benefits like Medicaid?
It can, depending on your situation and state. That’s one reason to talk with a licensed broker and a tax professional before moving forward. It’s also covered in the NAIC’s consumer guide linked below.
How long does the process take?
Typically a few months from application to payout, depending on how quickly medical records and underwriting can be completed.
Talk to a Life Settlement Broker Before You Assume Either Way
None of this is a test you need to score yourself on. It’s a starting point for a conversation. If you’re an advisor working through this with a client, our piece on where a life settlement expert fits alongside your role goes into more detail.
If you’re a policyholder wondering about your own policy, our Policyholders page walks through the full process.
You can also request a no-obligation review online. We’re happy to talk it through, even if you’re still exploring the idea.
For an independent, non-commercial overview of how life settlements work, the NAIC’s consumer guide on life settlements is a good place to start.
