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

Life insurance is usually purchased to solve a problem at a specific time. Protecting family. Supporting a business obligation. Planning for estate liquidity. Over the years, priorities change. The policy stays in force. Premiums keep coming. What once made sense may no longer fit your balance sheet.

If you own a life insurance policy in Iowa that no longer aligns with your goals, you are not limited to surrendering it back to the insurance company for a modest cash value or letting it lapse. Iowa 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 structured to provide liquidity while maintaining clear consumer protections.

Is It Legal To Sell My Life Insurance Policy in Iowa

Yes. Iowa regulates viatical and life settlement transactions under state law, and the Iowa Insurance Division licenses both viatical settlement providers and viatical settlement brokers.

In plain terms: if you are selling as an Iowa resident, you should be dealing with a licensed provider, and if you use a broker, that broker should be licensed in Iowa as well.

Who Actually Buys Iowa Policies

In an Iowa life settlement, the buyer is a licensed settlement provider. That provider becomes the new policy owner and beneficiary, takes over future premiums, and ultimately collects the death benefit.

Behind providers are institutional investors and professional capital sources. If a broker is involved, the broker represents you and can market your policy to multiple providers so you can compare offers instead of taking the first number you hear.

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 Iowa

For most policyowners, value is determined by the market through competitive bidding among licensed providers.

Buyers typically evaluate:

• Age of the insured
• Health and realistic life expectancy
• Policy type and issuing carrier
• Face amount
• Premium structure and long-term cost

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

Minimum Payout Requirements for Viators

Iowa establishes minimum payout standards to ensure that viators receive a reasonable return when selling their life insurance policies. When life expectancy is less than 25 months, providers must pay at least the following percentages of face value (less any outstanding loans):

Insured's Life Expectancy-25 months or more- Cash surrender value of policy

These minimum percentages may be reduced by 5% when the policy is written by an insurer rated less than the highest four categories by A.M. Best or a comparable rating by another rating agency.

For viators with a life expectancy of 25 months or more, Iowa law requires that the payment not be unreasonable or unjust, and must at least equal the cash surrender value. In evaluating whether a payment is fair, the commissioner may consider factors including the insured's life expectancy, the carrier's rating, and prevailing discount rates in the settlement market.

Illustrative example; may not reflect the value of your policy.

Holding Period In Iowa

Iowa imposes a five year holding period before most life insurance policies may be sold in a life settlement transaction.

In practical terms, a settlement generally cannot be entered into unless the policy has been in force for at least five years from its issue date. This rule is meant to prevent policies from being purchased mainly for resale.

Iowa law does allow limited, narrowly defined exceptions that can permit a sale inside the five year window. These exceptions are not automatic and must be supported with documentation.

For standard planning purposes, Iowa should be treated as a five year holding state.

Rescission Rights In Iowa

Iowa provides a statutory rescission right after a settlement is completed.

You may rescind the transaction before the earlier of:

• Thirty calendar days after the contract is executed by all parties, or
• Fifteen calendar days after the settlement proceeds have been paid

To rescind, you must return the settlement proceeds and any premiums, loans, or loan interest paid by the provider during the rescission period. If the insured dies during the rescission window, the contract is treated as rescinded, subject to repayment requirements.

Escrow And How Funds Are Handled

Life settlement proceeds in Iowa are typically handled through an independent escrow arrangement.

In practice:

• The buyer wires settlement funds into escrow
• Ownership and beneficiary changes are processed by the insurer
• After confirmation, escrow releases funds to the seller

You should not be transferring ownership based on a promise of later payment. The money should be secured while the carrier processes the change.

Broker And Provider Licensing

Iowa separates the buyer side from the seller side.

A settlement provider is the buyer and must be licensed with the Iowa Insurance Division.

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

Licensing is how Iowa enforces consumer protection in this market.

How The Process Works In Iowa

A typical Iowa life settlement follows this sequence:

• Initial screening based on age, health, policy type, and premiums
• Authorization to collect medical records and verify policy details
• Underwriting and life expectancy evaluation
• Offer generation, often from multiple providers if a broker is involved
• Review of contracts and required disclosures
• Funding into escrow and policy transfer
• 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.