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Yes. Selling Your Unwanted Life Insurance Policy is a Legal and Safe Transaction

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elderly couples selling their life insurance policy for cash

Yes. Selling Your Unwanted Life Insurance Policy is a Legal and Safe Transaction

JULY 11/2022

While the term “life settlement” may still be new to some seniors, each year thousands of consumers over the age of 65 sell their policies for cash.

In 2021 alone, senior consumers were paid $715 million by financial institutions that purchased 3,000 policies totaling nearly $4 billion in face value.

Yet, many consumers remain wary of the idea of selling their policy even though it is no longer needed or has become a burden to maintain. As they search for answers, some seniors may have been influenced by misinformation on social media platforms or elsewhere on the web that question whether the transaction is legal and safe.

For those who are seeking the facts and not a sales pitch, the answer is yes. Life settlements are legal and safe, as detailed in the following timeline.

Legal and Chronological History of the Life Settlement Market

  1. 1911:  A Supreme Court decision provided the legal foundation for selling one’s life insurance policy. In the case Grigsby vs. Russell, the Supreme Court ruled that life insurance policies are considered personal property and, as such, may be bought and sold freely and legally, just as any other personal asset.
  2. 1980s: The AIDS epidemic spawned a marketplace for terminally ill patients who sold their life insurance policies in order to pay for medical treatment.
  3. 1996:  The Health Insurance Portability and Accountability Act became law in 1996 and required the creation of national standards to protect sensitive patient health information. The new law also gave the beneficiaries of policyholders the ability to legally transfer their policy to a third party.
  4. Early 2000s: The senior settlement market emerged and provided older consumers who had life-limiting health conditions the option to sell an unwanted policy for cash. Regulatory oversight by the states was in the early stages during this period of time.
  5. 2005: As the population of aged seniors increased and as members of the baby boom generation grew nearer to retirement age, the life settlement market reached a new plateau of growth. Many financially-savvy boomers who were overseeing their parents’ financial affairs viewed selling unwanted policies as a smart exit strategy from an obsolete asset.  
  6. 2008: The economic crisis of 2008 ushered in an era of extensive reforms in the financial services industry, including increased oversight by more state regulators involving life settlements.
  7. 2011:  The first round of baby boomers (born 1946-1964) turned age 65 in 2011. Since that time, approximately 10,000 baby boomers hit retirement age each year and begin to meet the qualification criteria for a life settlement.
  8. 2020: In 2020, the life settlement market reached a peak milestone in terms of transaction volume. A total of 3,241 policy owners were paid more than $848 million by financial institutions (banks, pension plans, hedge funds, etc.) who purchased their policies.
  9. 2022:  According to the Life Insurance Settlement Association, 43 states and Puerto Rico now regulate life settlements, affording approximately 90% of the U.S. population protection under comprehensive life settlement laws and regulations. As a result, life settlements are one of the most strictly regulated financial transactions in most states.

Bottom Line

As with any major financial transaction, doing your research and consulting your financial or insurance advisor is an important first step when considering a life settlement.

If you are interested in learning more about life settlements and the secondary market, there are a number of articles found online written by news media journalists and other unbiased and reputable third-party sources.

For example, one article that has been particularly helpful for seniors is found on and is titled “Why Life Settlements Offer a Way Out.”

Our team is also available to answer your questions and to provide you with solid guidance. Feel free to reach out to us at 800-216-2513, or use our online calculator to obtain an immediate estimate of your policy’s value.


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