When the premium notice arrives, it’s easy to focus on getting that bill out of your budget. Before surrendering the policy, find out whether selling it would leave you with more cash after costs.
Surrendering ends the coverage and pays any available cash surrender value. In a life settlement, the buyer pays you for the policy and keeps it active, taking over the premiums and collecting the death benefit when you die. Your family gives up that payout, so weigh its needs alongside the cash.
Get the Insurer’s Payout in Writing
Use a fresh surrender quote. The cash value printed on an annual statement can be out of date, and it may not show what you’d receive after deductions.
Guardian explains that surrender charges can lower the payment on a permanent policy. If you’ve borrowed against the policy, the unpaid loan and interest can reduce it too. The insurer’s quote should identify those deductions and show whether they’ve already been taken out. You do not want to subtract the same loan twice.
The death benefit is the payout your beneficiaries would receive if you died while covered. It isn’t the amount the insurer pays when you surrender.
An ordinary term policy has no cash surrender value. Some term policies have a conversion option that allows a switch to permanent coverage a buyer may consider. Before paying to convert, confirm the deadline and have the policy reviewed for a possible sale. Conversion by itself doesn’t guarantee a buyer.
Find Out Whether a Buyer Is Interested
The buyer wants the future death benefit and must keep paying premiums to receive it. Your age and health help the buyer estimate how long those bills may continue. Together, the benefit and the expected premiums affect what a buyer is willing to pay. A policy with little cash value may still attract an offer, while having more cash value doesn’t ensure one.
A life settlement calculator is one way to check whether your policy may qualify for a sale. It is an initial screening step. An actual offer requires a buyer to review the policy and medical information.
Keep the insurer’s quote while you explore a sale. It gives you a figure to compare with any offers that come back, though you should ask for an updated quote before making the final decision.
Work Out What You Would Keep
For policies sold in 2025, the Life Insurance Settlement Association reported $212,066 as the average payment to the seller. Average cash surrender value was $24,360, making the sale payment nearly nine times as large. Individual results vary. These figures describe completed sales, not every policy submitted for review, and they cannot predict your offer.
For your own comparison, put the insurer’s current written quote next to a buyer’s written offer. A calculator estimate doesn’t commit anyone to paying you that amount.
| Cost to Check | On the Surrender Quote | On the Sale Offer |
| Fees and charges | Which surrender charges have already come out | Whether fees and commission have already been deducted |
| A loan against the policy | The loan balance and interest reflected in the quote | How the loan will be repaid and the payment left for you |
| Remaining premiums | When the surrender ends coverage and payments | Premiums you owe before the sale closes |
The sale offer should show your net proceeds, meaning the amount left after deductions. If commission has already come out, don’t take it off again in your own comparison. You should be able to follow each deduction through to the amount you’ll receive. Before signing, get any difference you can’t explain cleared up in writing.
Any premium you pay while waiting for the sale to close is another cost to include. A pending application does not transfer that responsibility to a buyer.
Both choices can result in a tax bill. For surrender, the IRS says the taxable part is the amount above your cost in the policy. Have a tax professional check both quotes against your policy records, especially any outstanding loan, before you budget around the proceeds. This article provides general information, not individual tax advice.
If you receive Medicaid or other assistance with income or asset limits, take the proposed payment to a benefits counselor as well. FINRA cautions that money from a life settlement can affect eligibility for public assistance.
Who Still Needs This Coverage?
Look at the names on the policy’s beneficiary form. The coverage should fit the people who depend on you now and the bills they would face after your death. SavingK covers this part of retirement planning in its advice on reviewing who would receive your life insurance benefit.
If premiums are the reason you’re considering surrender, ask about reduced paid-up coverage. Where this option is available, the Insurance Information Institute explains that you can stop paying premiums and leave a smaller death benefit in place. The insurer can tell you how much.
If a serious illness is creating a need for cash, ask about an accelerated death benefit. The insurer may pay part of the death benefit early if your policy includes the feature and you meet its illness rules.
If you no longer need the insurance and the offers don’t leave you much better off, surrender may be enough. If someone still depends on the benefit, look at keeping or changing the policy.
Check the Offers and Payment Dates
FINRA advises shopping around for a life settlement. Collecting several bids is how companies such as Citizens Life Group compare what buyers are willing to pay. The person handling your sale should show you the offers received and explain the payment after fees.
The paperwork for a sale includes access to personal and medical records. Before you authorize their release, read the privacy terms and find out who can receive them. A later resale can also mean your records go to another buyer, according to the National Association of Insurance Commissioners’ consumer guide to life settlements.
Get an expected timetable for both choices, then put any premium dates next to it. You need to keep the coverage in force during the review. If a payment deadline is approaching, call the insurer to discuss what you can do to keep the policy active.
