Life insurance is legally your property. You can sell a policy the same way you’d sell a car or a house.
Most policyholders don’t know that, so they treat the policy as something to keep paying on, or something to walk away from.
There’s a third option: selling it on the secondary market through a life settlement.
Billions of dollars disappear every year through the first two paths. This article covers why more seniors are choosing the third.
Lapsing and surrendering: the two default outcomes
Lapse: coverage simply stops. Every dollar paid in premiums is gone, and beneficiaries get no death benefit.
Surrender: the insurer buys the policy back for its cash value, minus a surrender charge to cover its own costs. What’s left is far below the death benefit, and the gap is widening: the average surrender value insurers paid fell 27% year over year, from $33,493 in 2024 to $24,360 in 2025 (LISA, 2025).
Both outcomes leave money on the table. A life settlement is usually the better option, and it’s the one most policyholders never hear about.
You can check whether your policy qualifies in a few minutes.
Reasons policy owners are choosing life settlements
Awareness
The biggest reason people don’t sell is that they don’t know they can. LISA surveys have repeatedly found that a majority of seniors 65 and older are unaware the option exists.
That single fact is worth more than almost any other piece of financial information they’ll come across this year.
The policy is no longer wanted or needed
Policies are usually bought to protect a spouse or dependent children. Kids grow up. Spouses become financially independent.
Mortgages get paid off. When the original reason for the coverage disappears, the premium stops being protection and starts being a recurring expense with no upside.
The policy is a burden
Premiums compete directly with the cost of aging. The national median cost of assisted living reached $6,200 a month in late 2025, up 5% year over year, according to the CareScout Cost of Care Survey.
On a fixed retirement income, the premium is often the first expense to go, and both lapsing and surrendering are worse outcomes than selling.
Health has declined
As health declines, the math changes twice. Care gets more expensive, and the policy itself can become worth more on the secondary market, since settlement value tracks life expectancy.
HHS estimates that roughly 70% of Americans turning 65 will need some form of long-term care during their lifetime. A life settlement converts a policy that would otherwise lapse into funds for care that’s needed now.
Long-term care planning
This is closely tied to health decline, but it deserves its own line. A long-term care life settlement route proceeds directly into a dedicated account for assisted living, memory care, or in-home care, instead of paying out as unrestricted cash.
Chris Orestis, president of Retirement Genius, is credited with pioneering this structure, which the National Association of Insurance Commissioners has recognized as a legitimate private-market tool for funding long-term care.
Cash
Some policyholders simply want liquidity, whether for travel, a major purchase, or shoring up retirement income. A policy sitting unsold is an illiquid asset earning nothing until death. A life settlement converts it to cash on the policyholder’s own terms.
The 2025 numbers
LISA’s 2025 annual market data is the most current, sourced picture of this market available. In 2025:
- LISA members completed 2,955 life settlements, up 9.48% from 2024.
- Consumers received an average of $212,066 per settlement, against an average surrender value of $24,360, nearly nine times more.
- Total payouts to consumers reached $626.6 million, $554.6 million more than those same policyholders would have received by surrendering.
- Since 2021, LISA members have paid consumers $3.6 billion for policies they no longer needed.
LISA itself notes that consumer awareness remains low despite this track record. That gap, not any single statistic, is the real problem here.
Frequently asked questions
What exactly is a life settlement?
The sale of an existing life insurance policy to a licensed third-party buyer for a lump-sum cash payment, typically more than the cash surrender value and less than the death benefit.
After the sale, the buyer takes over future premiums and becomes the beneficiary.
Who typically qualifies?
Qualification depends mainly on the insured’s age, health, and policy type and size, not on being terminally ill. Most sellers are 65 or older with a policy at risk of lapsing or being surrendered.
Full qualification guidelines are on the Policyholders page.
How is the settlement value determined?
Buyers weigh the death benefit, the ongoing cost of premiums, and the insured’s life expectancy. A shorter life expectancy or a larger death benefit generally increases the offer, which is part of why settlement value often rises just as health declines.
Are life settlements regulated?
Yes. Life settlements are legal and regulated in most U.S. states, with licensing and disclosure requirements for brokers and providers. That regulation is part of why the market now moves hundreds of millions of dollars a year (see the 2025 numbers above).
Will selling my policy affect my beneficiaries or my taxes?
Once sold, the buyer becomes the new beneficiary, so anyone previously named on the policy no longer receives a death benefit from it. Proceeds can also carry tax implications depending on the policy’s basis and how the funds are used.
Talk to us for a no-obligation consultation before deciding, and check with your own financial or tax professional.
Find out what your policy is worth
Most policyholders never sell because no one ever tells them they can.
If a policy no longer fits your life, or premiums have become a strain, or health has changed the picture, it’s worth finding out what the policy could bring on the secondary market before you let it lapse or surrender it for pennies on the dollar.
See if your policy qualifies, only takes a few minutes and comes with a no-obligation review, or contact us directly with questions about a specific policy, by filling out a form.
For more on the topic, browse the blog.
