Sell Your Life Insurance Policy in New Mexico and Michigan | 2026 Viatical Settlement Guide

People buy life insurance with the best intentions. It may have been for family protection, business continuity, or long-term planning. When a serious illness enters the picture, priorities shift. Access to liquidity becomes more meaningful than a distant death benefit.

Most states regulate both life settlements and viatical settlements. Michigan and New Mexico handle things differently. Their statutes regulate only viatical settlements, meaning transactions where the insured is chronically or terminally ill. If you qualify as a viator, your transaction falls under a defined regulatory structure. If you do not meet those health requirements, the state does not prohibit selling your policy, but the sale is not governed by a specific settlement statute.

This guide explains how both states work, where they overlap, and where they diverge.

What Is a Viatical Settlement

A viatical settlement is a sale of a life insurance policy by someone who has been diagnosed with a chronic or terminal illness. The seller receives a lump sum payment. The buyer becomes the new owner, takes over premium obligations, and receives the death benefit.

Michigan and New Mexico both regulate these transactions. Neither state has a dedicated life settlement act.

Michigan Viatical Settlements

Michigan regulates viatical settlements through Act 386 of 1996. The law defines who qualifies as a viator, requires licensing for providers and brokers, and sets rules for contract content, disclosures, and rescission rights.

Who Qualifies in Michigan

In Michigan, you must meet the state's definition of a viator, which generally means having a qualifying terminal or chronic illness. The statutory scheme was designed specifically for medically driven transactions.

Regulation and Consumer Protections in Michigan

Michigan's law governs:

• Licensing of viatical settlement providers and brokers
• Mandatory contract disclosures
• Handling and documentation of viatical transactions
• Oversight and enforcement by state regulators

Michigan does not regulate life settlements outside the viatical context. If you are not chronically or terminally ill, a sale is still legally allowed, but it is not covered by Michigan's viatical settlement protections.

Michigan Rescission Period

Michigan law gives the viator a statutory rescission window. Under Act 386 of 1996, a viatical settlement contract must allow rescission:

• Within 30 days after the contract is executed, or
• Within 15 days after the viator receives the settlement proceeds

The contract must spell out how rescission works and how the policy is restored if the viator cancels.

Example Michigan Viatical Case

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

• Policy: $1,200,000
• Insured: 62-year-old with a terminal cancer diagnosis
• Surrender value: $10,500
• Viatical settlement offer: $285,000

New Mexico Viatical Settlements

New Mexico regulates only viatical settlements. The statutes and administrative code define who qualifies, how contracts must be structured, what disclosures are required, and how providers can communicate with insureds after closing.

Who Qualifies in New Mexico

New Mexico applies viatical settlement rules to sellers who are certified as terminally or chronically ill. The law mirrors national standards for defining illness severity.

What New Mexico Regulates

New Mexico's law governs:

• Licensing of viatical settlement providers and brokers
• Form, content, and disclosures in viatical contracts
• Privacy and handling of medical information
• Escrow and timing for settlement proceeds
• Limited post-settlement contact rules

New Mexico, like Michigan, does not regulate life settlements for healthy insureds. A policyowner can still sell a policy, but there is no statutory oversight of that sale.

New Mexico Rescission Period

New Mexico requires every viatical settlement contract to offer an unconditional right to rescind for at least 15 calendar days after the viator receives the settlement proceeds.

If the insured dies during the rescission period, the viator's estate may rescind the contract as long as proceeds are returned.

Example New Mexico Viatical Case

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

• Policy: $900,000
• Insured: 58-year-old with a chronic neurological condition
• Surrender value: $9,800
• Viatical settlement offer: $215,000

What Happens if You Don't Meet Viatical Requirements

If you do not meet the medical requirements that define a viatical settlement under state law, you may still sell your life insurance policy. Michigan and New Mexico do not prohibit life settlements. They simply do not regulate them.

Selling outside the viatical statute means:

• There are no licensing standards
• No mandated disclosures
• No statutory rescission period
• No regulated forms or protections

This is the same situation found in several unregulated life settlement states.

How the Process Works in Both States

1. Confirm Eligibility- Confirm that the policyowner meets the state's definition of a viator
2. Initial Evaluation- A licensed provider or broker evaluates viatical eligibility
3. Document Collection- Medical and policy information is collected
4. Underwriting- The provider underwrites the case and calculates value
5. Contract Presentation- Written viatical disclosures and a contract are presented
6. Closing- Closing occurs and funds move through escrow
7. Rescission Period- The rescission clock begins based on state law

Most viatical settlements take several weeks to complete.

Safety Concerns and The Hitman Question

A common concern people have when considering selling their life insurance policy is whether it could put them in danger. This worry is understandable but unfounded. Life settlements are purchased by regulated institutional investors—pension funds, asset managers, and insurance companies—not individuals with any personal interest in the insured.

These buyers manage diversified portfolios containing hundreds or thousands of policies. Their returns come from actuarial performance across the entire pool, not from any single policy. The economics simply don't support foul play, and the industry has operated for decades without a single credible incident.

For a deeper exploration of this topic, see our article: The Hitman Question: Are Life Settlements Safe?

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.