How Long Do You Have to Wait to Sell Your Life Insurance Policy?

How Long Do You Have to Wait to Sell Your Life Insurance Policy?

As much as we’d like to think we are in total control, the truth is that life is unpredictable. When their circumstances change, many seniors consider selling all (or part) of their life insurance policy in exchange for a cash payout. 


This is what’s called a life settlement, in which a policyholder sells their policy to a life settlement company. That company, in turn, takes over paying the policy’s remaining premiums and ultimately receives the policy’s death benefit. In exchange, the policyholder walks away with a one-time cash payout that’s worth between four and seven times as much as they’d receive were they to just surrender or cancel their policy.


If you’re thinking that sounds like a win-win, you would be correct. But is selling a life insurance policy you no longer want or need the right move for you? And, if so, when is the best time to sell your life insurance policy? We’ll cover all of that and more in this brief article.


How Long Do You Have to Have a Life Insurance Policy before You Can Sell It?

It depends on where you live—in most regulated states, you’ll need to have held your policy for at least two years, although other states may require you to have held the policy for as long as five years.


Additional Eligibility Requirements

Having held the policy for the requisite number of years is just one factor in the eligibility equation. Other requirements include:


  • Age: The policyholder is at least 65 years of age (though there are certain medical-related exceptions).


  • Policy Type: Most policy types are eligible, including universal life and whole life policies, as well as term life policies with a convertibility option.

  • Death Benefit: The policy’s death benefit should be at least $100,000.


To see if your policy qualifies, use our free qualification calculator.


Can You Sell Your Life Insurance Policy If You Are Under 65?

Typically, no—unless you have certain health conditions that may qualify you for an exception. For reference, the average age of a life settlement candidate is actually 75 years old.


Can I Sell My Term Life Policy for Cash?

Again, no—unless it has a convertibility option. In that case, you would first need to use that option to convert it into an eligible whole life policy. Not all term life policies include a convertibility rider, so you’ll first need to carefully read over your policy to see if it’s included.


How Much Money Do You Get When You Sell Your Life Insurance Policy?

Before answering this question, it’s important to distinguish between a policy’s cash surrender value and the potential amount you might receive as a life settlement payout for that same policy. Consider the following definitions from Investopedia:


  • A policy’s cash value is equal to “the sum of money that grows in a cash-value-generating annuity or permanent life insurance policy.” (Learn more.)


  • Its cash surrender value is “the actual amount of money a policyholder will receive if they try to withdraw all of the policy’s cash value.” (Learn more.)


Neither of these items is likely to provide the same return as selling your policy to a life settlement company. Even if you work through a life settlement broker who earns a commission, the settlement you receive is likely to be four to seven times higher than either the cash value or surrender value.


How Much Can You Sell a $100,000 Life Insurance Policy For?

The average life settlement payout is roughly 20% of the policy’s face value—so you can expect to receive around $20,000 if you have a $100,000 policy that qualifies for a life settlement. While some clients scoff a bit at that rate of return, it’s important to remember that it’s a much more profitable option than simply canceling your policy or letting it lapse!


Where Is the Best Place to Sell a Life Insurance Policy You No Longer Want or Need?

If you decide that a life settlement is right for you, you have two main options: working with a life settlement company directly, or going through a broker. Either way, you’ll be able to benefit from industry expertise as you work through the process. While life settlement brokers do typically require a small percentage of the transaction as their commission, their ability to find the best company to sell your life insurance policy to.


The biggest benefit of working with a life settlement company or broker is their vast expertise and experience. They are highly familiar with the pros and cons of selling a life insurance policy in a life settlement, including topics most of us don’t care to think much about (like the potential tax implications of selling your policy, or whether now is the right time to make the move).


At LSA, We’re Ready to Handle Your Case

If you’re considering a life settlement, don’t hesitate to contact our dedicated team. If your policy is eligible for a life settlement, we would be happy to work with you. We’ll make it as easy as possible, and put our 40+ years of combined experience to work on your behalf.

Get in touch with Life Settlement Advisors today to take the first step toward converting your policy into cash.
Life Settlement Advisors
Leo LaGrotte
At Life Settlement Advisors, we strive to be a voice of confidence and assurance for our clients. Our goal is to educate you about the life settlement process so you can make an educated decision about whether it is right for you.