If you no longer need your life insurance policy or can no longer afford the premiums, you may be wondering what your options are. You could surrender the policy, take out a loan against it, or explore more specialized options like an accelerated death benefit or a viatical settlement. One option is a life settlement, where you sell your policy to a third party for a cash payout. But how does that stack up against the alternatives?
This article will walk you through a side-by-side comparison to help you decide which path offers the most value based on your needs and circumstances.
What Is a Life Settlement?
A life settlement is the sale of an existing life insurance policy to a third-party buyer in exchange for a lump-sum cash payment. The buyer assumes responsibility for future premium payments and receives the death benefit when the insured passes away.
To qualify, you typically need to:
- Be 65 or older
- Own a policy with a face value of $100,000 or more
- Have experienced a decline in health since the policy was issued
The key benefit? Life settlements often yield significantly more than simply surrendering the policy—in some cases, up to 4-8x more.
Other Options to Consider
Surrendering the Policy
If you choose to surrender your life insurance policy, you cancel the coverage and receive the policy’s cash surrender value. This is often the fastest and simplest route, but it usually provides the lowest payout.
Pros: Immediate access to cash, no buyer or third-party involvement
Cons: Low return, ends your coverage permanently
Policy Loans
Many permanent life insurance policies accumulate cash value, which can be borrowed against in the form of a policy loan. You don’t have to repay the loan, but any unpaid amount will reduce the death benefit.
Pros: Quick access to funds, no need to sell your policy or undergo underwriting
Cons: Unpaid loans can cause the policy to lapse or significantly reduce the death benefit
Accelerated Death Benefits
Some policies offer an accelerated death benefit rider, which allows you to access a portion of the death benefit early if you are diagnosed with a terminal or chronic illness.
Pros: Direct access to funds in a time of need, no sale or external buyer needed
Cons: Only available under specific health conditions, reduces the payout to beneficiaries
Viatical Settlements
Similar to a life settlement, a viatical settlement involves selling your policy to a third party. However, this option is reserved for individuals with a terminal illness, often with a life expectancy of two years or less.
Pros: High payout potential, fast access to cash
Cons: Only available to those with a qualifying terminal diagnosis
When a Life Settlement Makes Sense
A life settlement might be your best option if:
- You no longer need the coverage
- Premiums have become unaffordable
- You want to use the funds for retirement, healthcare, or other expenses
- You qualify based on age, health status, and policy value
Comparison at a Glance
| Option | Eligibility | Payout Potential | Pros | Cons |
| Life Settlement | 65+, $100k+ policy, declining health | Moderate-High | Higher payout, frees up cash | Process can take weeks, permanent sale |
| Surrender | Any | Low | Simple, fast | Least cash value |
| Policy Loan | Policy with cash value | Varies | No sale, no underwriting | Can lapse policy if unpaid |
| Accelerated Benefit | Terminal/chronic illness | Moderate | No third-party sale | Reduces death benefit |
| Viatical Settlement | Terminal illness | High | High payout | Only for terminally ill |
Final Considerations
Before deciding, consider the following questions:
- Do you still need life insurance coverage?
- Can you afford to keep paying premiums?
- What are your cash needs in the short term?
- What is your health status and how might that impact your eligibility?
Be sure to consult with a qualified life settlement professional who can provide you with everything you need to make an informed, confident decision.
Your Policy, Your Choice. Make It Count.
A life settlement can be a powerful tool for accessing hidden value from a life insurance policy you no longer need. But it’s not the only option—and depending on your situation, an alternative like a policy loan or an accelerated death benefit may make more sense.
Curious whether a life settlement is right for you? Learn more or complete this form for a free, no-obligation consultation with one of our experts.