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

Life insurance is something people buy for a reason. Time passes. Circumstances shift. Premiums increase and coverage sometimes stops making sense. When that happens, a life settlement can turn an old policy into cash. Vermont allows these transactions, but it has a regulatory structure that looks a little different from most states.

The statute focuses on transparency. It requires licensing for brokers and providers, sets limits on what brokers can earn, and in certain cases creates minimum payout standards. Vermont also has special rules that apply only when a policyowner is terminally ill. Understanding the distinctions will help you decide whether a settlement is the right move.

Is It Legal to Sell My Life Insurance in Vermont

Yes. Vermont regulates life settlements and requires providers and brokers to be licensed. Transactions must follow state requirements for disclosures, contract terms, escrow, privacy and payout calculation.

Vermont has a five-year waiting period. A policy must have been in force for at least five years before it can be sold through a life settlement.

If someone approaches you about buying your policy and they are not licensed in Vermont, that buyer is not permitted to transact with you.

Who Buys Life Insurance Policies in Vermont

Policies are usually purchased by institutional investors. Pension funds, investment partnerships and dedicated life settlement funds view life insurance as a long term asset. You do not negotiate directly with them. A licensed settlement provider handles the transaction and becomes the new owner. If you choose to work with one, a broker represents you and shops the case for offers.

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 Vermont

Value depends on age, health, premium structure and policy type. Vermont adds something unusual to the mix. When the insured is terminally ill the law sets a payout floor. This floor is tied to the death benefit, supplemented by the full amount of the net cash surrender value. Premiums needed to keep the policy in force for the insured's remaining life expectancy may be deducted. Other deductions such as broker fees cannot be used to reduce the required minimum.

Minimum Payouts for Terminally Ill Policyowners

Vermont requires minimum payouts for terminally ill policyowners based on remaining life expectancy. These minimums are calculated as a percentage of the expected death benefit, net of any outstanding loans and cash surrender value. The Commissioner may waive these requirements upon request of the policyowner.

The expected death benefit is the death benefit provided under the terms of the policy, assuming the death of the insured were to occur on the date the life settlement contract is signed. The payout is increased by 100 percent of any net cash surrender value of the insurance at the time the life settlement contract is issued.

These rules apply only when the insured is terminally ill. They do not apply to standard life settlements for seniors who are not facing a terminal diagnosis.

Example Vermont Settlement Scenarios

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

Example 1 – Terminally Ill Insured

• Policy: $500,000 universal life policy
• Insured: 72-year-old with terminal diagnosis, life expectancy of 10 months
• Surrender value: $25,000
• Minimum payout calculation: 80% of $500,000 = $400,000, plus $25,000 cash surrender value = $425,000 minimum
• Settlement offer: $430,000

Example 2 – Terminally Ill Insured

• Policy: $1,000,000 whole life policy
• Insured: 68-year-old with terminal illness, life expectancy of 4 months
• Surrender value: $85,000
• Minimum payout calculation: 85% of $1,000,000 = $850,000, plus $85,000 cash surrender value = $935,000 minimum
• Settlement offer: $940,000

Example 3 – Standard Life Settlement

• Policy: $300,000 convertible term policy
• Insured: 78-year-old with chronic conditions (not terminal)
• Surrender value: $0
• Settlement offer: $72,000

Note: Minimum payout rules do not apply to non-terminally ill insureds.

These examples illustrate how Vermont's minimum payout rules protect terminally ill policyowners while standard settlements are priced based on market factors.

Broker Compensation in Vermont

Vermont limits how much a broker may earn. The statute caps broker compensation at two percent of the amount paid to the policyowner. Some exceptions may apply in certain circumstances. This rule keeps fees from swallowing a large portion of the payout.

Brokers must disclose their compensation and any relationship with the provider before you sign a contract.

The unique trust account rule applies only to terminally ill insureds. When the insured is terminally ill and a settlement contract reduces the payout by subtracting future premiums needed to keep the policy in force, the provider must place those deducted premium amounts into a trust account. This protects the insured by ensuring the premium money is available as promised. This requirement does not apply to healthy seniors in standard life settlement transactions.

Consumer Protections in Vermont

Vermont includes several protections to make sure the process is handled responsibly.

Medical and personal information must be kept confidential. Providers and brokers have strict limits on how often they may contact the insured to ask about health status. If life expectancy is more than six months they may check once every three months. If life expectancy is six months or less they may check once every two months.

Rescission and Escrow Rules

Vermont provides a thirty-day rescission period. After the settlement contract is executed, the policyowner has thirty days to change their mind and cancel the transaction.

Vermont requires providers to use independent escrow arrangements. You send executed transfer documents to the escrow agent. The provider must fund the proceeds within three business days of the insurer confirming the ownership change. Once the confirmation is received, the escrow agent releases the funds.

If the provider does not tender settlement funds on the schedule disclosed in the contract, you may void the agreement until payment is made.

If the insured dies during an applicable rescission period and funds were placed in trust, the contract is treated as rescinded once proceeds are returned along with any premiums the provider paid.

How the Process Works in Vermont

Next Steps for Vermont Policyowners

• Confirm whether your policy qualifies (must be at least five years old)
• Request a valuation from a licensed provider or broker
• Gather policy statements and basic documentation
• Review disclosures including broker compensation
• Understand your thirty-day rescission right

Your policy is an asset. Vermont's rules exist to make sure you understand the terms before moving forward.

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.