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

You may have purchased a life insurance policy years ago to protect your family, secure your business, or support estate plans. Over time, priorities change. Premiums can rise, the policy may no longer serve its original purpose (the beneficiaries and loved ones may be financially independent), or you may simply prefer the liquidity of a lump-sum of cash today instead of a future death benefit.

Many Texans do not know that they can sell an unwanted or unneeded life insurance policy. These sales, known as life settlements, often produce far more than surrendering the policy. Texas maintains a regulated life settlement market with clear consumer protections, which makes it one of the most active states for policyowners who want to compare offers.

Life settlement transactions are legal and regulated in Texas, by the Texas department of Insurance (TDI). If your policy qualifies, exploring a sale may be beneficial.

Is It Legal to Sell My Life Insurance in Texas?

Yes. Life settlements are permitted under the Texas Insurance Code. Life settlement providers and brokers must be licensed by the state in order to legally purchase or negotiate a policy. Texas requires written disclosures, the use of secure escrow for all funds, and a 15-day rescission period that gives policyowners time to cancel the transaction.

Texas also imposes a two-year holding period, meaning policyowners must have owned their policy for at least two years before it can be sold as a life settlement.

If a company is not licensed in Texas, it cannot legally buy or negotiate your policy. Always ask for license verification before sharing medical records or policy documents.

Who Buys Life Insurance Policies in Texas?

The ultimate buyers are typically institutional investors such as pension funds, private equity firms, family offices, and dedicated life settlement investment companies. They treat life insurance as a long-term financial asset.

Texas law requires that all purchases flow through a licensed life settlement provider. Even though the end buyers are institutional, the actual transaction cannot be completed directly with them. The provider handles underwriting, escrow, disclosures, fund transfers, and the final ownership transfer.

When you sell, you receive a lump sum. The provider becomes the new owner, takes over premiums, and collects the death benefit in the future. This turns a future benefit into immediate cash for you.

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 Texas?

Policy value depends on age, health impairments (terminally ill policyholders will usually have shorter life expectancy, which drives up the value of policies), type of policy (permanent life insurance is different than term life insurance), face value, the specific insurance carrier and future premium payments. Many Texans age 65 or older with policies of $100,000 or more receive offers that are significantly higher than surrender value.

Factors that influence pricing in Texas:

• Strong buyer competition in the Texas market
• Policy types common in Texas are familiar to institutional investors
• Texas law requires that any life settlement offer must exceed the cash surrender value or accelerated death benefit available at the time of application

A provider must review medical records, policy details, and premium projections to determine an accurate value.

Why Texas Residents Should Work With a Licensed Provider

Texas requires that life settlement providers be licensed. This ensures that policyowners receive proper disclosures, that funds are held securely in escrow, and that the process follows the requirements of the Texas Insurance Code.

Licensed providers offer:

• Transparent written disclosures
• Three-business-day escrow protections
• A regulated and predictable process
• Compliance with the 15-day rescission period
• Clear documentation

Unlicensed buyers may use improper forms, provide inaccurate pricing, or avoid escrow. Licensing protects the policyowner at every step.

How the Process Works in Texas

Most Texas transactions take between 60 and 90 days.

Why Texas Policyowners Sell

• Premiums have become unaffordable
• Estate or business plans have changed
• Coverage is no longer needed
• Desire for liquidity over future death benefit
• Long-term care or medical expenses
• Retirement income needs

Your policy is a financial asset. If its cash value today is more meaningful to you than maintaining coverage, selling may be the right move.

Texas Market Characteristics

• One of the largest life settlement markets in the country
• Strong buyer competition leads to competitive pricing
• Clear regulatory framework with consumer protections
• Large senior population with substantial policy holdings

Next Steps for Texas Policyowners

• Determine whether your policy qualifies
• Request a valuation estimate
• Consider gathering medical records in advance
• Compare multiple offers
• Review all disclosures carefully
• Confirm the provider holds a Texas license
• Speak with a CPA about tax considerations

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.