Can You Sell Your Life Insurance for Cash?

Yes — you can sell your life insurance policy for cash, and the process is called a life settlement. This strategy can provide a significant lump sum, especially if the policy no longer serves your needs.

Let’s explore how it works, when it makes sense, and what to watch out for.

What Is a Life Settlement?

A life settlement involves selling your life insurance policy to a third party (usually an investor). They pay you a lump sum now, take over your premium payments, and receive the death benefit when you pass away.

You can typically get more money than the cash surrender value but less than the death benefit.

When You Can Sell Your Policy

You may qualify for a life settlement if:

• You’re 65 or older

• Your policy has a death benefit of $100,000+

• You have a serious health condition (increases value)

• It’s a permanent policy (e.g., Whole Life, Universal Life)

Term policies can also be sold — if they are convertible to permanent insurance.

How Much Can You Get?

On average, life settlements pay 10% to 30% of the policy’s face value. For example, a $500,000 policy might bring $50,000–$150,000 in cash — depending on your age, health, and policy terms.

Pros and Cons

Pros:

• Get fast access to cash when you need it

• Stop paying monthly premiums

• Use the money for medical bills, retirement, or anything you want

Cons:

• Heirs won’t receive the death benefit

• May affect Medicaid eligibility

• Could trigger tax consequences

Alternative: Cash Value Withdrawal or Loan

If you have a Whole Life or Universal Life policy, you may also:

• Withdraw from the cash value

• Take a loan against it (tax-free if repaid)

This keeps your policy active while accessing funds.

Final Thought

Selling your life insurance can be a powerful tool to unlock cash — but it’s not right for everyone. Consider your long-term goals, talk to a financial professional, and compare all options before deciding.

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