Like any personal property, your life insurance can be sold through a life settlement.
The amount received from selling a policy will always be greater than the cash surrender value and less than the death benefit value.
“Americans who sold their unwanted life insurance policies, collectively received more than four times the amount they would have received had they surrendered them to their life insurance companies.”
London Business School Study, 2014
“US policy owners received 4-8 times more than the policy cash surrender values from life settlements from 2006-2009."
US Government Accountability Office (GAO) Study, 2010
A life settlement is the sale by the owner of a life insurance policy to a third party for an amount greater than its cash surrender value and less than the death benefit. The seller of the policy receives a cash payment. The buyer of the policy assumes all future premiums payments and receives the death benefit upon the passing of the insured.
Most policies sold are for insureds over age 65 years of age or have a significant health impairment. The older the age, the more likely a settlement will result.
Universal Life, Whole Life and Convertible Term Life Policies. Policies with little cash value work really well.
Generally those with a death benefit of $250,000 and higher are more desirable for a life settlement.
The process can take anywhere from two to four months depending on the time frame in obtaining medical records and life insurance policy information. We are now using electronic medical records retrieval through HUMAN API and this has significantly, shortened the time line.
Yes they are taxable and we recommend you consult your tax advisor for more information. Here is the link to the IRS site. https://www.irs.gov/irb/2009-21_IRB