How to Sell Your
Life Insurance Policy
At Abacus Life, our goal is to help you fully understand life settlements and how they relate to the value of your life insurance policy. Take the next step toward learning how to sell your policy.
Table of Contents
What is a Life Settlement?
A life settlement is a financial transaction in which you sell your existing life insurance policy to a licensed life settlement provider. The sale price is higher than the policy's cash surrender value, but less than the full death benefit.
When you sell your policy, ownership and beneficiary rights transfer to an institutional investment fund, and you receive a lump-sum cash payment that is often six to eight times more than the cash surrender value. This money is yours to use however you choose.
In some cases, a life settlement can also take the form of a retained, paid-up death benefit, allowing you to keep a portion of the benefit without paying future premiums.
Life Settlements vs. Viatical Settlements
Both involve selling a life insurance policy, but the key difference lies in the health of the insured. A viatical settlement is specifically for policyholders who are chronically or terminally ill, often with a life expectancy of less than two years.
| Life Settlement | Viatical Settlement |
|---|---|
| Insured is typically a senior in their late 70s. | Insured has a chronic or terminal illness. |
| Proceeds are usually 10%–80% of the death benefit. | Proceeds typically range from 50%–80% of the death benefit. |
| Funds are generally taxable, unless IRS exemptions apply. | Proceeds may be tax-free if specific IRS criteria are met. |
A Brief History
In 1911, the U.S. Supreme Court ruled in Grigsby v. Russell that life insurance is personal property, establishing your legal right to sell your policy. Since then, the industry has evolved into a well-regulated market with licensing requirements per state.
Timeline of Life SettlementsBy Definition
A life settlement is the sale of an existing life insurance policy to a licensed buyer for more than its cash surrender value, but less than its death benefit.
The policy owner transfers ownership rights and receives a lump-sum cash payment with no restrictions on how it's spent.
Term Life
Temporary coverage for a set period. Premiums may remain level or increase annually.
Whole Life (WL)
Permanent insurance with fixed premiums and guaranteed cash value accumulation.
Universal Life (UL)
Permanent insurance with flexible premiums, but the annual cost of insurance (COI) increases over time.
Death Benefit / Face Value
The amount beneficiaries receive upon the insured's death.
Cash Surrender Value
What the insurance company pays if you cancel the policy, which is always less than a life settlement offer.
Case Studies
Abacus has helped clients receive an average of 6–8 times the policy's surrender value. Here are two real examples.
William, 84 — Wayne, NJ
$5,000,000 Policy | Abacus Offer: $1,200,000
William and his family decided their policy was no longer needed for their estate plan and considered surrendering it to the insurance company for a low payback. His daughter Amy explored a better option: selling the policy to Abacus. With his age and medical history, Abacus provided a payout double the cash surrender amount the insurer was offering, returning $1.2 million to his family.
Read William's Story →Sandra, 79 — Bakersfield, CA
$200,000 Policy | Abacus Offer: $110,000
Sandra was struggling under the weight of high monthly premiums of more than $2,200 a month and considered letting her policy lapse. Through Abacus's hybrid option, she received $110,000 for medical care and family needs, while Abacus quickly paid her premiums to keep the policy current so her beneficiaries still receive their benefits.
Read Sandra's Story →Get One Step Closer to Learning the Value of Your Policy Today!
Use our Life Settlement Calculator for a free consultation with no obligation to sell.
Life Settlement CalculatorCan I Sell My Life Insurance Policy?
Yes. Your life insurance policy is your property, which entitles you to sell it if you choose to do so. The average payout is 6–8 times the policy's cash surrender value.
To qualify, you'll generally need to meet these minimum factors. Each case is unique and these are guidelines, not hard rules:
- A policy with $100,000 or more in death benefit
- Insured is generally over age 70
- A decline in health since the policy was issued may improve your offer, but is not required
If the insured has a terminal illness, a viatical settlement may be the right option. Use the Settlement Calculator or call us at 800-561-4148 to discuss your options.
What Policy Types Qualify?
Almost all types of life insurance policies qualify, including universal life, whole life, term life, convertible term, group life, and survivorship policies. Permanent policies like universal and whole life are generally the easiest to qualify, but all policy types will be considered.
Can I Sell Only a Portion of My Policy?
Yes. With the retained death benefit option, you keep a guaranteed percentage of the death benefit while eliminating all future premium payments. This is a great option for those who want to free up cash but still leave something for their beneficiaries.
Quick Qualification Guide
$100,000+ in death benefit
Generally age 70 or older, though younger policyholders with health impairments may qualify
Most policy types qualify: universal, whole, term, convertible term, group life, and more
Terminal illness? A viatical settlement may be the better fit.
Check My EligibilityWhy Do People Sell Their Life Insurance?
With healthcare, long-term care, and living costs on the rise, retirees often find themselves needing more financial flexibility. Here are the most common reasons people pursue a life settlement.
Can No Longer Afford Premiums
Shifts in the insurance market, underperformance, or unexpected expenses like medical bills or assisted living fees can make premium payments unsustainable. A life settlement eliminates all future premium obligations.
Funds Needed for Medical Care
Selling your policy to recoup built equity is a viable option for funding significant expenses, including cancer treatments, assisted living, medical costs, and premiums on another existing policy.
Re-Invest for a Better Opportunity
Whether it's investing in a business, paying off debt, purchasing an income-generating annuity, or taking advantage of another opportunity. A life settlement puts your equity to work for you now.
Life Circumstances Have Changed
Divorce, retirement, estate planning changes, or beneficiaries who no longer need the policy benefits are all common reasons to reconsider a life insurance policy you've been holding onto.
Supplement Retirement Income
A comfortable retirement can cost anywhere from $858,000 to $1.5 million. Life settlement proceeds can be used any way you choose: travel, a new home, or simply adding to your savings.
Afford Long-Term Care
Long-term care and assisted living costs continue to rise. A settlement can provide the financial assistance you need to live comfortably, without depleting other savings or burdening family members.
Free Consultation with No Obligation to Sell
You will receive an initial offer within 24–48 hours of contacting us, assuming you qualify.
Life Settlement CalculatorHow Many Different Life Settlement Options Are There?
There are three options to consider: traditional, retained benefit, and hybrid. The right one depends on your financial goals and what matters most for your family.
How Much Will You Get for Selling Your Policy?
Since each case is unique, there isn't one universal answer. However, you can generally expect to receive about 20%–25% of your policy's face value as a cash payout. A $200,000 policy, for example, might return $40,000–$50,000.
Use the Abacus Life Settlement Calculator for a free, instant, no-obligation estimate.
Here's how the key factors influence your offer:
Life Expectancy
Our underwriting team evaluates health history, age, and lifestyle to estimate life expectancy, which is the primary driver of your offer.
Age of the Insured
Older insureds typically receive higher payouts, as there are fewer projected premium payments ahead.
Health of the Insured
Current health conditions affect life expectancy calculations. Any changes in health since the policy was issued can meaningfully impact the offer.
Premium Schedule
Higher ongoing premiums reduce the offer amount. The more a buyer must pay going forward, the less they can pay upfront.
Policy Type
Permanent policies like universal and whole life are most common. Term policies can qualify, especially with a chronic or terminal health condition.
Policy Size
Larger policies yield larger payouts. A $1M policy at 30% of face value returns $300,000, versus $30,000 for a $100K policy at the same rate.
Waiting Periods by State
Depending on your state, you may need to have owned your policy for a minimum period before selling. Most states require a 2-year waiting period, while 11 states require 5 years and Minnesota requires 4 years.
Policy Size Matters
The payout is typically calculated as a percentage of your policy's face value. A $1,000,000 policy and a $100,000 policy both estimated at 30% would return $300,000 vs. $30,000, a significant difference.
Get My Free EstimateHow To Sell Your Life Insurance Policy
As a direct buyer, Abacus has streamlined the process to move quickly and cut out the middleman so we can pay you more. Here are the 8 steps.
Deciding to Sell
The policyholder and their beneficiaries consciously pursue the option, consulting a financial advisor or the Abacus team to ensure it's the most beneficial choice. There is no cost or obligation at any time.
Determining Eligibility
An in-house medical underwriter reviews the insured's medical records to calculate life expectancy and determine policy value, at no cost to you.
The Offer
Abacus extends a formal offer for more than the cash surrender value but less than the net death benefit. We must be licensed in the state where the policy owner resides.
Acceptance
If the offer is acceptable, the policy seller accepts and requests the required documents for review. You are never obligated to proceed.
Contracts
State-approved contracting documents are generated, recording the transaction and spelling out the full agreement. Both parties sign and notarize.
Verification
A third-party verification agent (often a law firm) confirms all contracts are completed correctly, the policy is in good standing, and purchase funds are held in escrow.
Change of Ownership
We submit a request to transfer ownership with the insurance carrier, transferring ownership from the policyholder to Abacus or its named financing entity.
Funds Transfer
Once the carrier confirms the ownership change, the escrow agent releases funds to you. The new owner assumes all future premiums. The transaction is complete.
How Long Does It Take?
Our goal is to complete the life settlement process within 30 days. The timeline can vary depending on how quickly the insured, insurance company, medical records offices, and bank all respond.
Rest assured, Abacus works diligently to move your settlement forward as fast as possible.
Start the Process TodayHow Can You Use the Cash?
There are no restrictions on how you spend your life settlement proceeds. Common uses include:
Get One Step Closer to Learning the Value of Your Policy Today!
Use our Life Settlement Calculator for a free consultation with no obligation to sell.
Life Settlement CalculatorLife Settlement Regulations
Life settlements are legal and have become a well-regulated industry. The market is governed on a state-by-state basis, with most states requiring specific licensing and strict oversight to ensure customer safety.
According to LISA, 30 states have a mandated 2-year waiting period before selling a policy, 11 states require 5 years, and Minnesota requires 4 years. Regulations vary; refer to your state's insurance department for specifics.
Abacus Life is a licensed life settlement provider in all states excluding Alaska.
What If I Change My Mind?
Most states offer a rescission period of 1–2 weeks after a settlement is completed. During this window, you can return the payout in full and reclaim ownership of your policy. Once the period expires, the transaction is final. Always read the purchase agreement carefully and consult your advisor.
View Abacus Licensure by StateIs Selling My Policy Safe?
Pursuing a life settlement is a delicate process, and it's vital that you work with a reputable, certified company.
Abacus ensures your personal information stays private. Details shared during the process remain only within Abacus. We provide full transparency on how we generated your offer so you can feel confident in every step.
Abacus is HIPAA Certified, fully licensed nationally, and holds an A+ BBB rating.
Life Settlement Taxation
Life settlement proceeds are taxed in three tiers, calculated by subtracting the total premiums you've paid (your tax basis) from the settlement amount.
1. Tax-Free
Any proceeds up to your tax basis are free of income tax.
2. Ordinary Income Tax
Proceeds above the tax basis but below the cash surrender value are taxed at ordinary income rates.
3. Capital Gains Tax
Proceeds exceeding the cash surrender value are taxed as a capital gain.
Death benefit proceeds paid to beneficiaries upon the insured's death are generally not included in gross income. Any interest earned, however, is taxable.
For full details, visit the IRS or consult a CPA.
How Do I Get Started?
Start with the Abacus Life Settlement Calculator for a free, no-obligation estimate. We'll provide an initial offer within 24–48 hours of contacting us, assuming you qualify.
Abacus Life Settlements is a fully licensed, client-first company. With over $10 billion in policy face value purchased, our offers average around 6–8 times the surrender value of a standard policy, and we're committed to empowering every policy owner to make a fully informed decision.
The Abacus Promise
Get one step closer to learning the value of your policy today.
