Is It Safe to Sell Your Life Insurance Policy?

Did you know you can sell all or a portion of a life insurance policy, even term insurance?

(4-minute read)

Sometimes continuing a life insurance policy can be difficult to afford or it might be more coverage than you need. Whatever your circumstances, selling a life insurance policy is a safe alternative to maintaining your coverage and will provide you with some financial freedoms.

The best company to sell your life insurance policy to varies depending on your needs, but Life Settlement Advisors provides you with a life settlement broker to assist you in the process and tailor your plan to you. Let’s discuss what a life settlement is and how they are safe.

How Does a Life Settlement Work?

A life settlement is when a policyholder sells their life insurance policy to a third-party investor. Rather than allowing a policy to lapse or surrendering it to the insurance company for cash value, a policyholder can instead receive a lump sum for their policy from an investor. This lump sum is typically higher than the insurance cash value and less than the death benefit. The buyer also agrees to pay all premiums required throughout the life of the policyholder. Typically, the policyholder sells because they can no longer afford the monthly payments, they don’t need or want the insurance, they have growing medical costs, or they want the funds for other reasons.

Safe Practices For Selling Your Life Insurance Policy

If you’re asking, “Is a life settlement safe?” The answer is yes! Selling your life insurance policy is a safe alternative to letting your policy lapse or surrendering it. The Department of Insurance in each state regulates life settlements on a state-by-state basis. Currently, 45 states have regulations governing how these settlements are handled. Due to constantly changing compliance standards it is necessary for advisors to follow best practices and remain current on all regulations. Working with a professional ensures you are able to sell your life insurance policy with minimal risk. To make sure your life settlement is a safe as possible, consider following these practices:

  • Speak with a qualified expert who is familiar with the life settlement market .
    The purpose of meeting with a life settlement advisor is to inform you about the process of selling a life insurance policy so that you can make an informed choice about whether or not selling is suitable for you or your client.
  • Seek advice from a financial professional before making a decision.
    Speaking with a tax professional or CPA will give you specific and individual counsel on how a life settlement will affect you financially.
  • Use a certified broker to mediate a deal with a buyer.
    Both sides must agree to the transaction, and no one is obligated to accept an offer that they do not like. In most cases, sellers would be accompanied by a lawyer and/or a financial advisor to ensure that their desires are respected.

As with all financial decisions, it is best to speak with an advisor about your options regarding a life settlement. Life Settlement Advisors provides you with professionals to help you get what you need safely and quickly.

Should I Worry About Taxes?

While taxes can be a daunting task, there are regulations in place to avoid any complications or audits. You can rest assured that receiving a life settlement will not put any extra strain on filing your taxes. Overall, the taxes paid on a life settlement are dependent on the compensation you receive. There are three ways a policyholder will be taxed based on their life settlement:

  1. Proceeds received up to the total premiums paid are free of income tax.
  2. Proceeds received in excess of the total premiums paid up to the cash surrender value are subject to ordinary income taxation.
  3. Proceeds that are above the cash surrender value are taxed as capital gains.

A tax professional should be consulted before and after a life settlement is completed for tax guidance.

Providing Safe Life Settlements For You

At Life Settlement Advisors, we offer you the ability to gain financial freedom from your insurance policy with a life insurance settlement. Whether you need the money for expenses or don’t need as much coverage, you can sell your policy safely knowing you’re in the best of hands. With over 40 years of combined experience, we have the ability to educate you about life insurance settlements so you can make the best decision for you. Visit our website to see if you qualify.

Did you know you can sell all or a portion of a life insurance policy, even term insurance? Selling an unwanted life insurance policy is no different than selling your car, home, or any other valuable asset that will create immediate cash. Contact us today to learn more.

Leo LaGrotte

Life Settlement Advisors 


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.