Is Selling Life Insurance Dangerous? Myths and Facts

Benjamin Franklin once quipped that nothing is certain in life other than death and taxes. While this blog post won't deal with the income tax implications of selling your life insurance policy, it will dive into the fear of death. Or more precisely, the fear of sleeping with the fish tonight, per Don Corleone. One of the most common concerns and FAQs policy owners search before considering selling their permanent life insurance policies and carrying out a life settlement transaction is blunt but understandable:

"If I sell my life insurance policy, does that put a target on my back?"

Many times this question can arise even before the tradeoff of financial security for your loved ones vs immediate financial needs like paying for your medical expenses or long term care. The short answer to the "hitman question" is no. And the long answer has everything to do with how the life settlement market actually works.

Why the Concern Comes Up

In a life insurance buyout, the buyer becomes the both the new owner and the beneficiary of a policy and receives the death benefit payout (usually as a lump sum) when the policyholder passes away. For someone encountering this idea for the first time, it can feel unsettling. The logic seems simple: If someone profits when I die, is that dangerous?

It's a natural question — but it's based on a misunderstanding of who buys life insurance policies and how these investments are structured.

Who Buys Life Insurance Policies in a Life Settlement?

Life settlement buyers are not individuals making personal bets. They are typically regulated institutions, buying through licensed life settlement providers, such as:

• Pension funds
• Asset managers
• Specialist viatical settlement funds
• Institutional family offices

These firms operate under compliance rules, audits, and regulatory oversight. They purchase large, diversified portfolios of policies, often involving hundreds or thousands of insured individuals, make optimized monthly premium payments on an ongoing basis, and collect cash payment upon the ultimate maturity of the policies.

Your policy is not special. It is a very small data point in a large actuarial pool tracking the life expectancy of multiple insureds, calculated by underwriting your health conditions by reviewing your medical records and ultimate life expectancy, discounting the future premiums and ultimate death benefit.

No one is tracking a single insured person. No one benefits from focusing on individual outcomes. The investment thesis relies on averages and medians, not accelerated death benefit by sending a hitman your way.

Why Criminal Behavior Makes No Financial Sense

The idea of foul play collapses immediately under basic scrutiny.

Any suspicious death would trigger investigations, delay or freeze the insurance claim, and very likely result in lack of eligibility and no payout at all from the life insurance company. And who know, maybe the IRS would get involved as well. From an investment perspective, that outcome is disastrous.

Beyond the loss of capital, the buyer would face:

• Regulatory action
• Loss of licenses
• Reputational destruction
• Criminal prosecution

Professional investors seek predictable, boring returns. Criminal behavior introduces uncertainty, legal risk, and total loss — the opposite of what institutional capital is designed to tolerate.

What the History Shows

Life settlements have existed for decades. If selling life insurance policies meaningfully increased personal safety risk, there would be patterns: lawsuits, prosecutions, headlines, or regulatory crackdowns tied to violence.

There are none.

That absence is not accidental. It reflects the reality that serious firms do not operate anywhere near that line.

The Bottom Line on Safety

There are many real risks in life. Selling a policy through a regulated life insurance settlement process is not one of them.

If the "hitman question" comes to mind, it's best treated as something to acknowledge, understand, and then put aside, not as a deciding factor in whether to explore a life settlement.