Taxes & Insurance

If you reach age 65 with a life insurance policy you no longer need—because the circumstances you were insuring against no longer exist—you might be tempted to just stop paying the premiums. The same might be true of your retired parent or parents. However, such inaction can cause the policy to lapse and might generate an income tax bill, if there is a cash value. Instead, consider selling the policy.

Such sales, called life settlements, may be available to policyholders over 65 with a universal, convertible term, or whole life insurance policy. Often, institutional investors such as banks and pension funds purchase these policies, pay the ongoing premiums, and eventually collect the death benefit.


Buyers probably will want to know your medical history. If you have a health condition that shortens your life expectancy, you probably will get a higher offer for your policy. If you know an experienced life insurance agent, he or she can help you get bids from an investor group.

If you are uneasy with the idea that strangers will benefit from your death, a life settlement is not for you. In that case, you can surrender the policy to the insurance company and collect any cash surrender value. However, if you’re comfortable with this type of arrangement, selling your policy might bring you more money than a policy surrender.