The Ultimate Life Settlement Guide 2026

Life Settlements hit the headlines earlier this year with the "Cashing Out" documentary hitting screens. For the uninitiated, life settlements is a robust market in which policyholders can sell their life insurance policies to investors, generally for a lump sum payment (hence, the "cash out" phrase). The investors then assume the asset (and liability) side of the policy, continue paying premiums, and eventually collect the death benefit when the policy matures. Sounds morbid? Perhaps, but others would argue that this is a relatively easy way to liquidate an asset that has become too cumbersome to upkeep.

We'll dive into all of the mechanics of life settlements in this ultimate 2026 life settlements guide, and answer the following questions:

• What are life settlements and how does this work?
• How do I sell my life insurance policy?
• Who buys life insurance policies?
• Are life settlements legal?

I'm excited- let's go!

What are life settlements?

As noted above, carrying out a life settlement is the process of selling your generally permanent life insurance policy to investors, sometimes called a life insurance buyout. The most standard way this is carried out is when the policyholder cashes out of the policy, receives a one-time payment (which is lower than the death benefit and higher the the policy's cash value), and is gone with the wind. Not really- since the policyholder is still the ultimate insured of the policy, but the beneficiary and new owner of the policy is the buyer.

While some people may be shocked, or worse, from the concept, this is actually a mature market that has been around for a while. Ever since Grigsby v Russell in 1911, the concept of selling a life insurance policy (sometimes known as a viatical settlement) to a third party was born.

So how does this even work? Can anyone sell their policy? Will hitmen come after you to make sure the policy "matures"?

First of all, life settlements refers to life insurance policy (can't sell your health insurance policy). In theory, a lot of policies can be sold, but there are two sides to the transaction. And in order to transact, you need a buyer (which is generally a fund), to buy the policy. Which means, the policy needs to have value, and unfortunately, if you are a healthy 70 year old, most buyers won't generally look at your policy. A general rule of thumb is, the older and more health conditions you have (terminal illness is an advantage here), the more attractive your policy is going to be and the easier it will be for you to get offers and carry out a life settlement transaction.

It isn't generally enough for you to tell buyers that you have a significant disease, and therefore, you usually have to sign a HIPAA waiver, and pass all of your health information and medical records to potential buyers, in order for them to carry out medical underwriting and to evaluate your life expectancy. As noted before, the shorter your life expectancy, the more attractive your life insurance policy will be.

The second component, other than your medical condition, is your actual policy. Different buyers have different strategies, and some will buy very small (let's say 50K) or very large (let's say, 20M) policies, but a lot of buyers will have a certain buy-box strategy. That means that they will transact (potentially) if your policy is between 250K face value, up until 10M. Just throwing numbers around, but you get the picture. In order for the buyers to see whether your policy is interesting, and how much your life insurance policy is actually worth, they will need insurance information as well. As such, they will be looking at the life insurance company's rating (nobody wants another PHL-like collapse).

Other factors that buyers may look at include:

• Type of policy- your type of life insurance (universal life insurance policies trade more frequently than term life insurance policies or whole life insurance policies)
• Your projected future premium payment stream
• When your policy matures
• What are the monthly fees- such as administrative fees, premium load fees etc
• Calculate what the underlying cost of insurance (COI) is (more of that in another blog)
• How long your policy has been in force
• Which state the policy was issued in

All of these factors are crucial for buyers to get a better picture of your policy health and value, and helping them to determine what your life insurance policy is worth. For an initial estimate on the value of your life insurance policy, check out our life settlements valuation calculator.

How Do I Sell My Life Insurance Policy?

After getting a bit of a basic understanding about what life insurance settlements are- now let's dive in- how can you actually sell your policy and get life settlement offers? What is the actual life settlement process for getting that lump sum cash? We'll discuss the legal aspects more in depth below- but on a very high level, life settlements are regulated in 45 out of 50 states, with deep state insurance department involvement, so you can't just call a friend and ask if they want to buy your policy. Rather, you can generally proceed in one of two manners:

Option 1: Reach out to a life settlement broker

A life settlement broker is a licensed expert, who has a fiduciary duty towards you, as the initial policy owner, to get you the best possible price for your policy. If you find a good broker (and check out our life settlement broker guide) they will then reach out to various licensed providers to see if they are interested in your life insurance policy, and at which price.

• Advantages: The broker represents you, and if they are good, they might be able to get you a better price than a provider
• Disadvantages: Brokers can take a hefty fee, which will take a significant cut out of the amount you are set to receive

Option 2: Reach out directly to life settlement providers

Life settlement providers are licensed buyers of life settlements. Some work for a specific fund or buyer, and others are "free agents"- working with multiple funds and buyers.

• Advantages: You get to keep the entire cash payment amount and don't need to split it with your broker. This can also potentially be a much quicker process, as some funds can close quickly. Really quickly.
• Disadvantages: If you are uninitiated, some buyers may take advantage of that fact, and give you a lowball offer. You have to make sure you trust them and stay away from unsavory players in the market.

In either case, you will be providing either the broker or the provider with your policy and medical information (or as much of it as you have). Next steps are for the broker to reach out to licensed providers (or for the provider to reach out to funds/buyers) and potential buyers will start evaluating your life insurance policy. Which, as noted, is a combination of your projected life expectancy, and the various features of your policy (insurance premium amounts and future streams, additional costs, if and when the policy matures etc).

Assuming someone is interested in your policy, you may get one (or more than one bid)- until you reach an offer that you (and/or your broker) feel comfortable with. Next stage is due diligence, in which the buyer will dig deeper and make sure no red flags exist that can impact the deal.

Who buys life insurance policies?

As noted above, life settlements are regulated in 45 out of 50 states. Meaning, you can't just sell your policy to your neighbor. So, in order to buy a policy you need to be licensed in the state in which the policy is located. These licensed buyers are called life settlement providers. Some of them are stand-alone and represent either funds or themselves (some of them holding and then flipping policies over time), while others work with a wider host of buyers, and carry out auctions between those buyers. If you are working with a life settlement broker, or if you are working with a life settlement provider that has a few buyers in their book- you will generally have a bidding process in which the highest bidder will win (assuming the price is right), and as noted, will then start the due diligence process.

Are life settlements legal?

Surprisingly, life settlements have a significant history back from the days of 1911, in which this was litigated, up until today, in which 45 out of 50 states regulate life settlements (and the other five, do not). So yes, you can sell your policy in a heavily regulated process in the secondary market, to a licensed buyer (provider) and can be represented, if you choose, by a licensed broker. And despite what you might think, nobody is going to be setting a hit man after you. You will be a number, a statistic, in someone's large book of investments, and why not make some cash if you can?

Why life settlements can be an asset

Despite your potential hesitations, your main thought process should be- a life insurance policy is an asset, not only a liability. Don't just look at your upcoming premiums, but rather, at your future policy's death benefit. You may decide to keep your policy- but if you realize that it doesn't make sense for you at this point, then treat it like an asset (I am an accountant at the end of the day). And as an asset, the main question you should ask yourself is how much is this asset worth, and how can I maximize its potential value (along with what your upcoming liabilities, and medical bills or medical expenses, might be). And reaching out to speak to us is a damn good way to get the ball rolling and making an informed decision.

Determine if your policy qualifies

Age, health status, and policy type all factor into eligibility.

Gather your policy documents

Having your policy details ready speeds up the valuation process.

Request a valuation estimate

Get an idea of what your policy might be worth in today's market.

Compare offers and consult professionals

Work with licensed providers and consider consulting a CPA for tax implications.

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.