Sell Your Life Insurance Policy in Delaware | 2026 Life Settlement Guide

Life insurance is usually purchased to solve a specific problem. Protecting family members. Backstopping a business obligation. Planning for estate liquidity that once felt necessary. Over time, circumstances change. Health status changes. The policy stays in force. Premiums continue. What once made sense can become inefficient or unnecessary.

If you own a life insurance policy in Delaware that no longer fits your financial plan, you are not limited to surrendering it back to the insurance company for a modest cash value or letting it lapse. Delaware allows policyowners to sell qualifying life insurance policies to third parties for cash through the secondary market, commonly known as a life settlement.

These transactions are regulated by the state and designed to provide liquidity while setting clear rules around eligibility, disclosures, rescission rights, and consumer protection.

Is It Legal To Sell My Life Insurance Policy in Delaware

Yes. Under Delaware state regulations and insurance laws, life settlements and viatical settlements under its insurance code and Department of Insurance oversight. Licensed providers may purchase policies, and licensed brokers may represent policyholders in these transactions.

Delaware does not impose unusual deal structures or price controls. The framework focuses on who may participate, when a policy may be sold, and what protections apply to sellers.

Who Actually Buys Delaware Policies

In a Delawarelife settlement, the buyer is a licensed life settlement or viatical settlement provider. That provider becomes the new owner and beneficiary of the policy, assumes responsibility for future premiums, and ultimately receives the death benefit.

Behind these providers are institutional investors, life settlement funds, family offices, and other professional capital sources. When a licensed broker is involved, the broker represents the policyowner and markets the policy to multiple providers so offers can be compared.

Safety Concerns And The Hitman Question

Every once in a while someone asks the blunt question. If I sell my policy to a fund that gets paid when I die, does that put a target on my back?

It is a natural worry, but it does not line up with how this market actually works. For a deeper look at why this concern is unfounded, see our article on the "hitman" question.

Real buyers are regulated institutions. Think pension funds, asset managers, specialist life settlement funds, and family offices that live under compliance, audits and regulators. They buy large pools of policies, not one or two bets on a single person. Your policy is a tiny piece of a diversified portfolio. No one is sitting in a room watching your file and waiting for news.

More importantly, crime would completely destroy the investment. If someone were foolish enough to try something like that, the claim would be frozen, law enforcement would be involved, and the policy would become radioactive. The buyer would lose their capital, their license and their business, and the people involved would be looking at serious prison time. That is the exact opposite of what professional investors want.

There are plenty of real risks in life. Selling a policy through a regulated life settlement process does not meaningfully change your exposure to violent crime. The buyer wants a clean, boring actuarial outcome, not drama. If this were a real world problem you would see patterns of cases and headlines over the last few decades. You do not, because serious firms do not play games with that line.

If this worry is on your mind, it is better to treat it as something to acknowledge and then put aside, not as a deciding factor in whether to explore a settlement.

Retained Death Benefit And What Happens If The Buyer Stops Paying

In some transactions you do not sell the entire policy. Instead, you take part in cash today and keep a slice of the future death benefit. That structure is usually called a retained death benefit. The buyer agrees to carry the full premium load and, when the insured passes away, your family gets the retained portion without ever having to write another check.

The obvious follow up question is what happens if the fund or buyer stops paying premiums in ten years. If the policy lapses, your retained benefit disappears with it. That is a real risk, and it belongs in the contract, not swept under the rug.

Well structured deals handle this with clear protections. Common approaches include giving you the right to step in and assume the policy if premiums are not paid on time, or if the fund winds down or fails. In practice that can mean a clause that says if premiums are not funded by a certain date, ownership can revert or you can elect to take over and keep the policy in force by paying premiums yourself. Serious buyers also use professional servicing companies and advance notice requirements so you, your adviser, or your lawyer get notified long before coverage is at risk.

The point is that you do not have to simply hope the fund behaves. You can ask, in plain language, what happens if premiums are not paid, when you are notified, and what your rights are to step back in. If you are doing any kind of retained death benefit, those answers should be written into the settlement documents before you sign, so your family is not relying on a handshake twenty years from now.

How Much Is My Policy Worth In Delaware

Delaware does not regulate pricing. Value is determined by the market.

Buyers typically evaluate:

• Age of the insured
• Health (chronically ill generally helps here) and realistic life expectancy
• Policy type and issuing insurance carrier
• Face value
• Premium structure and long-term cost (they will usually review your life insurance contract, illustrations and annual statements)

For policies that qualify, settlement offers are usually materially higher than cash surrender value but well below the death benefit. Final pricing depends on underwriting results, premium efficiency, and buyer demand at the time the policy is marketed.

Holding Period In Delaware

Delaware uses a structured holding period framework rather than a simple single rule.

As a general baseline, a life insurance policy must be in force for five years from its issue date before it may be sold in a life settlement transaction. This five year rule is designed to prevent policies from being purchased primarily for resale- otherwise known as stranger originated life insurance (STOLI)- which as pretty common back in the mid 2000s, when people were pretty much premium financing others and reselling the policy shortly afterwards.

Delaware law also recognizes limited, narrowly defined circumstances that may allow a policy to be sold after two years, such as specific life events or health changes that arise after issuance. These exceptions are not automatic and must be supported by documentation.

Practical Planning: Most policyowners should treat Delaware as a five year holding state unless a clearly documented exception applies.

Rescission Rights In Delaware

Delaware provides a strong rescission right after a life settlement contract is completed.

A policyowner may rescind the transaction before the earlier of:

• Thirty calendar days after settlement proceeds are paid, or
• Sixty calendar days after the settlement contract is executed

To rescind, the policyowner must return the settlement proceeds and any premiums or loan interest paid by the provider during that period. If the insured dies during this rescission window, the transaction is treated as rescinded.

This rescission right is a statutory protection and must be disclosed in Delawarelife settlement contracts.

Escrow And How Funds Are Handled

Life settlement proceeds in Delaware are handled through an independent escrow agent or trust arrangement.

In practice:

• The buyer wires settlement funds into escrow
• Ownership and beneficiary changes are processed by the insurer
• After the life insurance company confirms the transfer, escrow releases funds to the seller

You should not be transferring ownership based on a promise of later payment. The funds are intended to be secured while the insurer completes the transfer.

Broker And Provider Licensing

Delaware clearly separates the buyer side from the seller side.

A life settlement provider is the buyer and must be licensed with the Delaware Department of Insurance.

A life settlement broker represents the policyowner and must also be licensed. Brokers are responsible for disclosures, marketing the policy, and presenting offers.

Licensing is how Delaware enforces consumer protection in the life settlement market.

How The Process Works In Delaware

A typical Delawarelife settlement follows this sequence:

1. Initial screening based on age, health, policy type, and premiums
2. Authorization to collect medical records and verify policy details
3. Underwriting and life expectancy evaluation
4. Offer generation, often from multiple providers if a broker is involved
5. Review of contracts and disclosures
6. Funding into escrow and policy transfer
7. Release of funds and start of the rescission period

Most transactions take roughly sixty to ninety days depending on medical record retrieval and carrier response times.

Disclaimer: The information provided in this article is for general informational purposes only and does not constitute legal, financial, or professional advice. Life settlement regulations vary by state, and this content should not be relied upon as a substitute for consultation with a licensed professional. Please consult with a qualified attorney, financial advisor, or licensed life settlement broker before making any decisions regarding the sale of a life insurance policy.