Mr. Potter’s bitter claim to George Bailey—“You’re worth more dead than alive!”—may have worked as drama in It’s a Wonderful Life, but it doesn’t reflect modern reality. For many seniors, life insurance policies hold living value, often providing options and financial benefits well before the end of life.
Through life settlements, seniors aged 65 and older frequently receive far more than their policy’s cash surrender value—sometimes many times over.
Seniors who sold their insurance through settlements often received 6.5 times the cash value that insurers offered, according to the Life Insurance Settlement Association. This fact alone debunks the myth that a life insurance policy only benefits heirs after death.
Understanding Life Settlements
A life settlement happens when a policyholder sells their life insurance to an outside entity rather than to the issuing insurer. Once sold, the buyer takes over premium payments and becomes the beneficiary upon the insured’s passing.
Typically, these agreements apply to seniors 65 and older with policies worth at least $100,000. However, exceptions exist. Individuals younger than 65 with severe or chronic health conditions may also qualify.
Why Do People Sell Their Policies?
Freepik | zinkevych | A life settlement allows policyholders to sell their coverage to a third party instead of the insurer.
People choose to sell their life insurance policies for many reasons, often tied to changing circumstances.
1. The most common is that the policy’s original purpose—like protecting a spouse or paying off a mortgage—no longer applies.
2. Premium costs have become unmanageable.
3. Extra income is needed for medical expenses, long-term care, or retirement.
Daniel Milan, managing partner at Cornerstone Financial Services, explained that instead of letting a policy lapse, selling it can provide immediate financial relief. Cashing out turns a dormant policy into usable money.
Who Buys These Policies?
Large-scale financial institutions often buy life insurance policies. These buyers may include: Banks, Pension funds, Hedge funds, and Insurance companies.
Bryan Nicholson, executive director of the Life Insurance Settlement Association, highlighted that these entities see policies as predictable long-term investments not tied to market volatility. This makes them appealing in diversified portfolios.
How Value Is Determined
The price offered for a life settlement isn’t random—it depends on measurable factors. A shorter or longer life expectancy, as determined by medical reviews, directly impacts value. So do the policy’s death benefit and the yearly premiums required to keep it active.
The type of policy also plays an important role—permanent life insurance policies generally attract higher offers than term insurance, since they include a cash value component.
Term policies, on the other hand, typically only qualify for a settlement if they are convertible to permanent insurance or if the insured is terminally ill.
The Selling Process
In most cases, policyholders use a broker when pursuing a life settlement. The broker introduces the policy to interested buyers and handles negotiations. Instead of charging upfront, they collect a success fee—typically 20% to 30% of the final sale price. From there, the process is kept as straightforward as possible:
A private application kicks things off with a review of medical and policy details.
An appraisal follows, measuring the policy’s strength alongside the insured’s health.
Offers arrive from interested buyers, spelling out payment terms.
Finally, the sale is completed, and the policy changes hands once conditions are satisfied.
This structure helps ensure sellers receive the most competitive value available.
Clearing the Myths
It’s no longer true that life insurance only matters after death. Today, policies are recognized as financial assets that can be sold—similar to real estate or stocks—while the owner is alive.
Freepik | Drazen Zigic | Life insurance is no longer just a death benefit; it's a financial asset you can sell for cash.
Seniors who qualify may find that life settlements provide financial stability during retirement, help cover healthcare costs, or simply reduce the burden of ongoing premiums.
With growing awareness, more people now view life insurance as a flexible financial tool instead of a rigid product. For many, selling a policy allows them to maximize its value and live with greater security.
Life settlements are reshaping how people think about life insurance. Rather than being bound to the original terms forever, policyholders now have more options. Seniors, in particular, can turn a policy into much-needed financial support while alive.
This shift highlights the importance of understanding all available options. A policy that once seemed like a future-only benefit can offer immediate, tangible value today. By rethinking outdated myths, policyholders gain control and flexibility that align with their evolving needs.