Companies That Buy Life Insurance Policies: Finding the Best Company to Sell Your Life Insurance Policy To

Introduction: Turning a Policy Into Cash

Life insurance is often seen as a financial safety net for loved ones after death. But what many people don’t realize is that life insurance can also become a liquid asset you can sell for immediate cash — even before death. If you no longer need your policy or are struggling with expenses, you may consider selling it.

In this blog, we’ll explore the companies that buy life insurance policies, how to find the best company to sell your life insurance policy to, what the process involves, and how to maximize your payout. Whether you’re selling due to health, retirement, or changed circumstances, knowing your options can unlock thousands — sometimes hundreds of thousands — of dollars.

What Does It Mean to Sell a Life Insurance Policy?

Selling a life insurance policy, also known as a Life Settlement, involves transferring ownership of your policy to a third party in exchange for a lump-sum cash payment. The buyer assumes responsibility for premium payments and collects the death benefit when you pass away.

Why Sell Your Life Insurance Policy?

• You no longer need the policy.
• You can’t afford premium payments.
• You want to cash in on your investment.
• You need funds for medical bills, debt, or retirement.
• Your beneficiary is no longer dependent on the payout.

Understanding the Life Settlement Market

The market for selling life insurance policies is driven by institutional investors, private equity firms, hedge funds, and licensed settlement providers. These entities purchase policies to add to investment portfolios because they provide predictable returns over time.

Life settlement transactions are legal, regulated, and increasingly popular among seniors, particularly those over 65 with policies valued at $100,000 or more.

Who Can Sell Their Life Insurance Policy?

To attract legitimate offers from companies that buy life insurance policies, you typically need to meet these requirements:

• Age: 65 or older
• Policy Type: Whole life, universal life, or convertible term
• Policy Value: Usually $100,000 or more
• Policy Age: In-force for at least two years (some states require more)
• Health Condition: Often, buyers prefer sellers with reduced life expectancy

Types of Companies That Buy Life Insurance Policies

When searching for the best company to sell your life insurance policy to, it helps to know what types of companies operate in this space:

1. Direct Life Settlement Providers

These companies purchase your policy directly and fund the transaction themselves. Examples include:

• Coventry Direct
• Abacus Life
• Magna Life Settlements
• GWG Life

2. Life Settlement Brokers

Brokers don’t buy the policy themselves. Instead, they shop your policy to multiple providers to get competing offers similar to a real estate agent.
Examples include:

• Harbor Life
• Welcome Funds
• Settlement Benefits Association

3. Financial Institutions and Funds

Some life insurance policies are purchased by hedge funds and institutional investors through settlement providers.

How to Find the Best Company to Sell Your Life Insurance Policy To

Choosing the best company to sell your life insurance policy to depends on transparency, reputation, licensing, and the ability to deliver the highest payout.

1. Verify Licensing and Accreditation

Only work with companies licensed in your state and registered with regulatory bodies like:

• The Life Insurance Settlement Association (LISA)
• Your state’s Department of Insurance

2. Compare Multiple Offers

The more bids you receive, the better your chances of a high payout. Brokers can help facilitate this, but they charge commissions.

3. Check Reviews and Ratings

Look at:

• BBB (Better Business Bureau) ratings
• Consumer Affairs
• Trustpilot
• Google Reviews

4. Understand Fees and Commissions

If you work with a broker, understand their commission structure. Some take up to 30% of the settlement amount others are more reasonable.

5. Request a Free Appraisal

Many reputable companies offer free, no-obligation quotes. Use this to your advantage to understand your policy’s value.

Top 8 Companies That Buy Life Insurance Policies Directly

Here’s a deeper look at some of the best-known and most reputable Life Settlement Buyers in the industry:

1. Coventry Direct

• Pioneer in the life settlement market
• Transparent, licensed in all 50 states
• Known for high payout percentages

2. Abacus Life

• Offers personalized support with financial advisors
• HIPAA-compliant processes
• Licensed settlement provider and public company

3. Magna Life Settlements

• Over 20 years of industry experience
• No-obligation quotes
• Strong client reviews for professionalism

4. Lighthouse Life Settlements 

• High client satisfaction
• Buys a wide market of policies
• Large network

5. Maple Life Financial

• Nationally licensed buyer
• In the market for over 20 years
• State-of-the-art tools designed to deliver superior risk assessments on an asset-by-asset basis

7. Habersham Funding

• Nationally licensed buyer
• Free evaluations
• Focus on policy valuation for decision-making

8. Berkshire Settlements

• Nationally licensed buyer
• No obligation and free evaluations
• In-house policy valuations and underwriting

How Much Can You Expect to Get?

The amount you receive from a life settlement varies significantly but is generally:

• 10% to 40% of the death benefit
• Higher if you have health issues and lower life expectancy

Example:

• Policy Face Value: $500,000
• Cash Surrender Value: $25,000
• Life Settlement Offer: $150,000

This means you could receive 6x more than surrendering the policy directly to your insurer.

How the Life Settlement Process Works

Here’s a general step-by-step breakdown:

Step 1: Initial Inquiry

Contact a provider or broker and submit basic policy details and health information.

Step 2: Appraisal

The company reviews your medical history and policy structure to determine eligibility and potential offer value.

Step 3: Offers and Bids

You may receive one or more offers depending on whether you use a broker or direct buyer.

Step 4: Acceptance

If you accept an offer, paperwork is drafted to transfer policy ownership.

Step 5: Escrow and Funding

Your settlement funds are placed into an escrow account. After transfer is verified, you receive your cash.

Step 6: Policy Transfer

Ownership and beneficiary rights officially move to the buyer.

This process typically takes 4 to 8 weeks from start to finish.

Tax Implications of Selling Your Life Insurance Policy

Selling your life insurance policy through a life settlement can be a valuable financial option—but it’s important to understand the potential tax consequences before proceeding. Life Settlement Taxes depends largely on how much you’ve paid into the policy (your cost basis) and how much you receive from the sale.

🔍 General Tax Rules for Life Settlements

When you sell a life insurance policy, the IRS divides your settlement proceeds into three tax categories:

1. Amount up to your cost basis – Tax-free
   Your cost basis typically includes the total premiums you’ve paid into the policy. This portion of your payout is not taxable.

2. Amount above your basis and up to the policy’s cash surrender value – Taxed as ordinary income
   This portion is considered a gain on the policy’s internal growth and is taxed at your regular income tax rate.

3. Amount above the surrender value – Taxed as capital gains
   The amount that exceeds the policy’s cash surrender value is considered a capital gain and is taxed at the applicable capital gains rate.

📌 Example Breakdown

Let’s say you’ve paid $40,000 in premiums (your basis), and the policy’s surrender value is $60,000. You sell the policy for $90,000. Here’s how it would typically be taxed:

• $40,000 (basis) → Tax-free

• $20,000 (difference between basis and surrender value) → Taxed as ordinary income

• $30,000 (amount above surrender value) → Taxed as capital gains

🧾 Important Considerations

• Every case is different. The IRS rules can be nuanced depending on your specific policy type and how long you’ve held it.

• Viatical settlements (for those who are terminally ill) may be entirely tax-free under IRS guidelines—consult a tax advisor to confirm your eligibility.

• Some life settlement companies, including Summit Life Settlements, may provide a tax summary or work with your financial advisor to assist in understanding your tax position.

✅ Consult a Tax Professional

Because the tax implications of a life settlement can vary depending on your personal situation, it’s important to consult a qualified tax advisor or CPA that understands the intricacies of the Taxes on Life Settlements before finalizing the sale. They can help you calculate your exact tax liability and ensure compliance with all IRS reporting requirements.

Pros and Cons of Selling Your Life Insurance Policy

Pros:

• Large lump sum of cash
• No more premium payments
• Fund medical bills, retirement, or family gifts
• Can be better than lapsing or surrendering a policy

Cons:

• Heirs won’t receive a death benefit
• May be taxed depending on your situation
• Could affect eligibility for Medicaid or SSI
• Privacy concerns with health records

Viatical Settlements vs. Life Settlements

Viatical Settlements are similar but specifically for people with a terminal illness (life expectancy under 24 months).

If you’re terminally ill, viatical settlements may offer faster processing and potentially tax-free benefits.

Red Flags to Avoid

Unfortunately, not all companies that buy life insurance policies operate ethically. Watch out for:

• Unlicensed or unregistered companies
• Vague contracts or missing terms
• High-pressure sales tactics
• Unreasonable commissions (above 30%)
• Requests for upfront fees

Always vet companies through the National Association of Insurance Commissioners (NAIC) or LISA.

Tips to Maximize Your Settlement Offer

• Work with a Life Settlement Broker to receive multiple competitive offers
• Be transparent with your health history
• Use online tools to estimate policy value ahead of time
• Keep premiums current while waiting for a sale
• Negotiate commissions when working with a broker

Case Study: Finding the Best Deal

Laura, age 76, held a $250,000 universal life policy.

• Surrender value: $18,000
• Direct offer from Provider A: $90,000
• Broker-sourced offer from Provider B: $130,000
• Final net after broker commission (10%): $117,000

Laura gained nearly 6.5x more than the surrender value by shopping her policy around. This illustrates the importance of comparing multiple companies.

Summit Life Settlements: Your Trusted Brokerage Partner

At Summit Life Settlements, we’re more than brokers—we’re client advocates. Our mission is to help policyholders and financial professionals unlock maximum value from life insurance assets with transparency, integrity, and results.

Through our exclusive Summit Life Marketplace, your policy is placed in front of a nationwide network of licensed institutional buyers. This auction-style platform creates real competition and ensures you receive the most competitive offers available—not just the first one that comes in.

✅ What to Do Next

• Request a free policy evaluation from Summit Life Settlements

• Compare real-time offers through our Marketplace

• Review the details carefully with support from our expert team

• Consult your tax and financial advisors to make an informed decision

• Sell with confidence, knowing you’ve maximized your return

With the right guidance and tools, you can turn a policy you no longer need into a powerful financial asset—benefiting you and your loved ones now, not just someday in the future. Summit Life Settlements is here to help you do exactly that.

Frequently Asked Questions (FAQs)

Q1: What are companies that buy life insurance policies?
These are typically licensed institutional investors or life settlement providers that purchase life insurance policies from policyholders in exchange for a lump-sum cash payment. After purchase, they take over premium payments and collect the death benefit when the insured passes away.

Q2: Why do companies want to buy life insurance policies?
Life insurance policies are considered investment assets. Buyers pay you cash now, take over your premiums, and later receive the death benefit—often making a profit over time based on your life expectancy and policy terms.

Q3: Who qualifies to sell their life insurance policy?
Most buyers look for policyholders who are typically 65 years or older or have serious health conditions. Policies should usually have a face value of $100,000 or more and be either permanent or convertible term policies.

Q4: How do these companies determine how much they’ll pay?
Buyers evaluate factors like the insured’s age and health, policy type, premium costs, and death benefit. Payouts usually range from 10% to 60% of the death benefit, depending on the case.

Q5: Are these companies regulated?
Yes. Most companies that buy life insurance policies are regulated at the state level, and must be licensed life settlement providers. It’s important to work with a broker like Summit Life Settlements to ensure you’re only dealing with vetted, reputable buyers.

Q6: Will I still have to pay premiums after selling?
No. Once the sale is completed, the buyer becomes responsible for all future premium payments. You receive your payout and have no further obligations to the policy.

Q7: How do I know I’m getting the best offer?
Working with a licensed life settlement broker gives you access to a broad network of buyers. At Summit Life Settlements, we use our Marketplace platform to create competition between buyers, helping you secure the highest possible offer.

Q8: Is selling to one of these companies better than surrendering my policy?
In most cases, yes. Selling your life insurance policy through a life settlement typically results in a much higher payout than surrendering it to the insurance company.

Q9: Is selling a life insurance policy legal?

Yes, life settlements are legal in all 50 states and regulated in most.

Q10: Do I have to be terminally ill to sell my policy?

No. That only applies to viatical settlements. Regular life settlements are for people over 65, regardless of illness.

Q11: Can I sell a term life policy?

Yes, if the term policy is convertible to permanent insurance. Most buyers won’t accept pure term policies.

Q12: Will my family still get a death benefit?

No. Once the policy is sold, the new owner receives the death benefit upon your passing.