You paid into your term life policy for years, maybe decades. But now the premiums feel like a burden, and the coverage isn’t as relevant as it once was. You’re not alone. Thousands of people ask the same question every year: Can I sell my term life insurance policy?
Here’s the short answer: Not directly. But if your policy is convertible, you may leave real money on the table by simply letting it lapse.
This article walks you through how to check if your term policy is eligible for conversion, how to convert it, and how to sell it through a life settlement. We’ll also cover when selling a term life insurance policy for cash is worth it, the steps involved, and how to avoid the mistakes that could cost you.
WHY TERM LIFE INSURANCE NORMALLY CAN’T BE SOLD
Term life insurance is temporary coverage that expires after a set period. It has no cash value and usually ends with you getting nothing in return. Unlike a permanent policy, which builds value over time, you can’t sell a term life policy for a payout through a life settlement. So most term policies lapse without any return. However, before you let that happen, a life settlement broker can help you determine if the policy is convertible — and a strong candidate for the market.
WHEN YOU CAN SELL A TERM LIFE POLICY — UNDERSTANDING CONVERTIBILITY
Convertibility is the key that unlocks the value in a term life policy. If your term life insurance includes a convertible rider, you may be able to convert it into a permanent life insurance policy, even late in the term.
Here’s what to look for:
- Review your policy contract for language like “convertible term” or “conversion privilege.”
- Look for deadlines: Some policies only allow conversion within the first 10 years or before a specific age.
- Contact your insurance provider to confirm the policy’s eligibility.
Keep in mind:
- Not all term policies are convertible.
- Some policies allow only partial conversions.
- The premiums for permanent insurance can increase significantly afterconversion.
- The carriers may limit which permanent products you can convert into.
SHOULD YOU CONVERT YOUR TERM POLICY TO SELL IT?
Before moving forward, take time to weigh whether conversion makes financialsense. Here are the three main questions to answer first:
- 1. What would your new premium be? A permanent life policy conversion can increase premiums by five to 15 times what you’re paying now. Make sure you can afford the new premium and that you’ll be able to sell your policy soon after conversion.
- 2. Are you eligible for a life settlement for term insurance? Buyers usually prefer policies from people who are 65 or older and haveexperienced a notable change in their health since the policy was issued.Furthermore, policies with a death benefit over $100,000 are more attractive, especially if the term is nearing expiration.
- 3. Would there be buyer interest? Not all policies are appealing to life settlement buyers. Some insurers or products are less desirable, and long life expectancies can reduce buyer interest.
Here’s a quick checklist. If two or more apply, conversion might make sense for you:
- You’re 65 or older.
- You’ve had a significant health change.
- Your policy has a death benefit of $100,000 or more.
- The policy is near expiration.
- You no longer need the coverage.
HOW TO SELL A CONVERTIBLE TERM POLICY
If your policy appears to qualify, a life settlement broker will review it before any term life conversion for a settlement takes place, so you don’t pay unnecessary costs up front. Here are the steps:
- 1. Get a preliminary policy valuation from a life settlement broker.
- 2. Confirm convertibility and deadlines with your insurer.
- 3. Request a quote for the new permanent premium.
- 4. Begin the life settlement process with your broker.
- 5. Let them secure an offer by presenting it to multiple buyers.
- 6. Convert the policy once an offer is ready to close.
- 7. Review the final paperwork and transfer ownership.
- 8. Receive your cash payout.
Timing still matters. Once a policy is converted, you’re responsible for higher premiums. So it’s smart to line up buyer interest beforehand and close quickly.
SELLING PART OF YOUR POLICY (PARTIAL CONVERSION)
A partial term conversion is one of the most overlooked options for selling a term life insurance policy. If your death benefit is large, you may be able to convert and sell a portion of your policy while keeping some for your own needs or your family.
This can reduce the premiums, unlock a payout, and allow you to retain a safety net.
Example: A 74-year-old with a $1.5 million term policy converted and sold $1.2million, receiving $45,000 in a life settlement. He retained $300,000 in coverage and used the payout to fund healthcare needs and travel in retirement.
4 TIPS TO SELL A CONVERTED TERM LIFE POLICY FOR MAXIMUM VALUE
Selling a converted term policy works best when you approach the process with a clear plan. Many people convert first and ask questions later, which can shrink the payout or add months of higher premiums. The tips below will help you sidestep avoidable issues and get the most from your policy:
- Tip 1: Know your deadlines and get premium quotes in writing. Missing a term conversion deadline can eliminate your chances of selling. Confirm the timeline and document everything.
- Tip 2: Understand what you’re actually selling. A buyer becomes the new policy owner and pays the premiums moving forward. If you sell only part of your policy, make sure you understand what happens to the portion you keep.
- Tip 3: Prequalify before you convert. A life settlement broker can help you estimate the value of your policy before you make the conversion. Prequalifying avoids converting a policy that may not sell.
- Tip 4: Use a broker who shops your policy around. Working with a life settlement broker for your term policy instead of a single buyer gives you access to competing offers. Brokers also handle the paperwork, health records, and closing documents.
By taking these steps, you protect your time and your budget. You also give yourself a better chance at receiving an offer that reflects the value of the policy you’ve paid into for years.
COMMON MISTAKES TO AVOID WHEN SELLING A TERM POLICY
People often move quickly once they realize they can sell an unneeded term lifepolicy. But rushing into it can create problems. Here are the most common mistakes to avoid:
- Converting before confirming market interest
- Delaying the sale and paying more in premiums than necessary
- Accepting a low offer without seeing competitive bids
- Forgetting about partial conversion options
- Missing the conversion deadline
- Not discussing the tax impacts with a professional
With a few careful checks, you can avoid unnecessary costs, keep more control over your options, and ultimately receive a payout that supports your goals.
A TERM CONVERSION CAN PUT REAL CASH BACK IN YOUR POCKET
Most term policies expire with no return. But if your policy includes a convertiblerider, you may be sitting on a hidden asset. A term life settlement offers a way to recover value you would otherwise lose.
With the right guidance, you can convert your term policy, sell it on the secondary market, and receive a lump-sum payment that helps you move forward. If you’re ready to find out what your policy might be worth, Life Settlement Advisors can help you take the next step confidently, and with no pressure.
Contact us for a quick review. A short conversation can show you whether a conversion or sale could bring value back to you or your family.
