Retirement Health Care Costs Reach $185,500 in 2026: Could an Overlooked Life Insurance Policy Help?
Trust Life Settlements, LLC · Florida Agency License #L138500
As retirement medical expenses rise, seniors are taking a closer look at assets they already own, including life insurance policies they may no longer need.
Key Takeaways
$185,500: Fidelity's 2026 estimate of what a single 65-year-old will spend on health care over retirement, up 7.5% from last year. Long-term care is not included.
54% of pre-retirees wrongly believe Medicare will cover all of their health expenses, according to the same Fidelity research.
Policy sale vs. surrender: a life insurance policy you no longer need may be worth more sold in a life settlement than surrendered for its cash value.
Nearly 9x: LISA's 2025 data shows an average life settlement payout of $212,066, compared with an average cash surrender value of $24,360.
Compare what you keep: broker compensation affects how much of an offer you actually take home. Ask for the gross offer, all fees and your net proceeds in writing.
Quick Answer
Can you sell a life insurance policy to pay for retirement health care? Yes, in many cases. A life settlement lets a policyowner sell an existing policy to an institutional buyer for a lump-sum cash payment. That payment is usually more than the cash surrender value but less than the death benefit. The buyer takes over the premiums and receives the death benefit later. Settlements are most common for people age 65 or older, or for younger people with serious health changes. The proceeds can be used for any purpose, including medical bills, home care or premiums for supplemental Medicare coverage. Selling ends the death benefit for your beneficiaries. It may also have tax consequences and can affect eligibility for Medicaid and other means-tested benefits.
How Much Will Health Care Cost in Retirement in 2026?
For many Americans, retirement planning is getting more complicated. Even retirees who saved carefully for decades may find that health care takes a larger share of their retirement income than expected.
According to Fidelity Investments' 2026 Retiree Health Care Cost Estimate, released July 21, 2026, a single person retiring this year at age 65 can expect to spend about $185,500 on health care and medical expenses throughout retirement. That is a 7.5% increase over the previous year's estimate.
That figure does not include long-term care, over-the-counter medications or most dental services.
Fidelity breaks the estimate into three categories:
| Cost category | Share of estimate | What it includes |
|---|---|---|
| Medicare Part B and Part D premiums | 45% | Monthly premiums |
| Other medical expenses | 48% | Copays, coinsurance and deductibles for hospital and outpatient care, plus services excluded by Original Medicare, such as vision and hearing exams |
| Out-of-pocket prescription drugs | 7% | Drug costs not covered by Part D |
Source: Fidelity Investments, July 21, 2026.
Fidelity calls the estimate a long-term planning benchmark. It assumes the person is enrolled in Original Medicare and Part D and has no employer-provided retiree coverage. It is not a bill everyone will receive, and actual costs depend on health, location and longevity. For married couples, combined expenses can be considerably higher.
Why Medicare Doesn't Cover Everything
Many Americans enter retirement expecting Medicare to cover most of their medical costs. Fidelity's research found that 54% of pre-retirees incorrectly believe Medicare will cover all of their health expenses.
Medicare provides essential coverage, but retirees remain responsible for premiums, deductibles, coinsurance and services Medicare excludes. As Steve Betts, head of Fidelity Health, put it in the 2026 release: "Medicare is a critical part of retirement health coverage, but it does not eliminate every health care expense."
That gap is pushing retirees to rethink how the assets they already own fit into their long-term plans.
The Retirement Asset Many People Overlook
When retirees need more cash, they usually look at savings, retirement accounts, home equity and investments. One asset often gets left off the list: an existing life insurance policy.
People typically buy life insurance to protect loved ones, replace income, pay off debts or support an estate plan. But circumstances change:
Children become financially independent.
Mortgages are paid off.
Businesses are sold.
A spouse passes away, or estate plans change.
A policy that once filled an essential need may no longer fit, yet it may still require substantial premium payments. Before surrendering it or letting it lapse, it may be worth checking whether the policy has value on the secondary market. See 5 signs your policy may be worth more than you think.
What Is a Life Settlement?
A life settlement is the sale of an existing life insurance policy to a third-party buyer for a one-time cash payment. The buyer takes over future premiums and receives the death benefit when the insured passes away. This right to sell a policy was recognized by the U.S. Supreme Court in Grigsby v. Russell (1911).
For qualifying policyowners, a life settlement may pay more than the insurance company's cash surrender value. Pricing depends on:
The insured's age and health
The policy type (universal, term with a conversion option, whole life and others)
The death benefit amount
Future premium costs
Life settlements are most commonly considered by policyowners age 65 or older. Younger people with significant health conditions may also qualify. Not every policy qualifies, and selling is not always the best financial decision. To learn more, read What Is a Life Settlement? and Who Qualifies for a Life Settlement?, or start with our free Policyowner's Guide to Life Settlements.
Life Settlement vs. Surrender Value: What the 2025 Data Shows
The Life Insurance Settlement Association (LISA) released its 2025 annual market data on May 19, 2026. Among consumers who sold policies through reporting LISA members:
| 2025 LISA market data | Figure |
|---|---|
| Average life settlement payout | $212,066 |
| Average cash surrender value offered by insurers | $24,360 |
| Payout compared with surrender value | Nearly 9x |
| Completed transactions | 2,955 (up 9.48% from 2024) |
| Total paid to consumers | $626.6 million |
| Additional amount compared with surrendering | $554.6 million |
Source: LISA 2025 Annual Market Data.
These are reported market averages, not a guarantee of what any one policy will sell for. They also don't compare identical policies side by side. Still, they show why it's worth evaluating your options before surrendering a policy. For a full comparison, see Life Settlement vs. Cash Surrender Value.
How a Life Settlement Can Help Pay for Retirement Needs
For an eligible policyowner, life settlement proceeds can be used for any purpose, including:
Funding Medicare premiums, supplemental coverage and out-of-pocket medical costs
Paying for home care or assisted living (see life settlements for retirement and long-term care)
Supplementing retirement income
Paying down debt
Building a cash reserve
Selling a policy also generally ends the seller's obligation to pay future premiums.
The Tradeoffs to Weigh
Your beneficiaries no longer receive the death benefit. Talk with your family first. Our guide to talking with your family about life settlements can help.
Proceeds may be taxable. Read our overview of life settlement tax implications and consult a tax professional.
Proceeds may affect means-tested benefits such as Medicaid or SSI.
Medical information is shared with prospective buyers as part of underwriting.
A life settlement is one option among several. Keeping the coverage, reducing the death benefit, taking a policy loan or using an accelerated death benefit may be a better fit. Consult appropriate financial, tax and legal professionals before you decide.
Why the Highest Life Settlement Offer Isn't Always the Best Deal
One of the most overlooked parts of a life settlement is broker compensation. A policyowner may receive an attractive offer without knowing how much of it they will actually keep after fees.
The table below is a hypothetical illustration. The percentages are examples chosen to show the math, not industry averages.
Hypothetical example: a $500,000 gross settlement offer
| Compensation structure | Broker fee | Seller receives |
|---|---|---|
| Hypothetical 15% commission | $75,000 | $425,000 |
| Hypothetical 20% commission | $100,000 | $400,000 |
| Hypothetical 30% commission | $150,000 | $350,000 |
| Trust Life Settlements flat fee (Tier 3: $250,001–$500,000) | $30,000 | $470,000 |
This example assumes identical gross offers, percentage fees calculated on gross proceeds, and no other deductions or tax effects. Actual broker compensation varies by firm and transaction. See the full published fee schedule.
In this example, the entire difference in net proceeds comes from how the broker is paid, not from a higher purchase offer. That's why it's important to ask every broker, in writing, for:
1. The gross offer
2. Every fee, including any compensation paid by the buyer
3. Your estimated net proceeds
Learn more in How Much Do Life Settlement Brokers Charge? and Flat Fee vs. Broker Commission.
A Transparent Alternative: Flat-Fee Life Settlement Brokerage
Trust Life Settlements is a licensed, independent, seller-side life settlement broker (Florida Agency License #L138500) with a published flat-fee schedule. Instead of a percentage of your proceeds, the fee is a fixed dollar amount set by the size of the final offer:
| Final settlement offer | Flat broker fee |
|---|---|
| Up to $100,000 | $6,000 |
| $100,001–$250,000 | $15,000 |
| $250,001–$500,000 | $30,000 |
| $500,001–$750,000 | $45,000 |
| $750,001 and above | $60,000 maximum |
Source: Trust Life Settlements pricing.
Trust Life Settlements represents only the policyowner. It presents eligible policies to 20+ institutional buyers and does not accept compensation from buyers, mark up offers or earn spreads. The fee is disclosed before you agree to proceed. See what a true flat-fee life settlement broker is and how the process works.
Don't just compare the offer. Compare what you keep.
Five Questions to Ask Before Surrendering a Life Insurance Policy
1. Do I still need the death benefit? Consider whether beneficiaries or financial obligations still depend on the coverage.
2. What is my policy's current surrender value? Ask your insurer for an updated statement or in-force illustration.
3. Could my policy qualify for a life settlement? Eligibility depends on the insured's age, health and the policy's economics. You can check if your policy may qualify in a few minutes.
4. Are multiple institutional buyers reviewing my policy? Competitive marketing can help surface the offers available, although it doesn't guarantee a higher price. See how to get the highest life settlement offer.
5. How much will I actually receive after broker compensation? Compare net proceeds, not just the gross offer. Already have an offer? Get a free second opinion.
Frequently Asked Questions
How much does health care cost in retirement in 2026?
Fidelity estimates that a single 65-year-old retiring in 2026 will spend about $185,500 on health care over retirement, up 7.5% from the prior year. That figure excludes long-term care, most dental services and over-the-counter medications.
Does Medicare cover all health care costs in retirement?
No. Retirees still pay Medicare Part B and Part D premiums, deductibles, coinsurance, copays and the cost of services Medicare excludes. Fidelity found that 54% of pre-retirees wrongly believe Medicare covers everything.
Can I sell my life insurance policy to pay for medical bills?
Often, yes. In a life settlement, you sell your policy to an institutional buyer for a lump sum, and you can use the proceeds for any purpose, including medical and home care costs. Eligibility depends mainly on the insured's age, health and the policy's terms.
Is a life settlement worth more than surrendering my policy?
It can be. LISA's 2025 data shows an average payout of $212,066, compared with an average surrender value of $24,360. These are market averages, and individual results vary. See Life Settlement vs. Cash Surrender Value.
How much do life settlement brokers charge?
It varies. Many brokers are paid a percentage of the settlement, and some also receive buyer-side compensation. Trust Life Settlements charges a published flat fee from $6,000 to a $60,000 maximum. Always ask for every fee in writing. See How Much Do Life Settlement Brokers Charge?
Are life settlement proceeds taxable?
Possibly. Part of the proceeds may be taxed as ordinary income or capital gains, depending on your cost basis and cash value. See life settlement tax implications and consult a tax professional.
The Bottom Line
Fidelity's latest research reinforces a simple reality: health care is one of the largest long-term expenses in retirement. For some retirees, that means reviewing investments, spending plans and income strategies. For others, it may mean taking a second look at a life insurance policy that no longer serves its original purpose.
A life settlement isn't right for everyone. But understanding what your policy may be worth, and how much of that value you would actually keep, can help you make a better-informed decision.
Explore Your Options With Trust Life Settlements
Trust Life Settlements helps eligible policyowners evaluate life settlement options through competitive marketing to institutional buyers and transparent flat-fee pricing.
Know what your broker charges before you start.
Call (800) 216-2513
Related Reading
Sources
Fidelity Investments, 2026 Retiree Health Care Cost Estimate, July 21, 2026
Life Insurance Settlement Association, 2025 Annual Market Data, May 19, 2026
Disclaimer: This article is for educational purposes only and does not constitute financial, legal, tax or insurance advice. Life settlement eligibility, offers, compensation, regulatory requirements and tax treatment vary by individual circumstances and jurisdiction. Selling a policy transfers the death benefit to the purchaser and may affect eligibility for public benefits. Consult qualified professionals before making decisions about existing life insurance coverage.
Trust Life Settlements, LLC · 1500 Park Center Drive #140, Orlando, FL 32835 · Florida Agency License #L138500.
This content is for informational and educational purposes only and does not constitute financial, legal, or tax advice. Every life settlement transaction is unique. Consult a licensed professional for advice specific to your situation.
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