Should You Surrender Your Life Insurance or Sell It? Here Is the Truth

Every year, hundreds of thousands of seniors surrender their life insurance policies back to the insurance company. Most of them have no idea they had another option — one that could have paid them significantly more. This article explains the difference between surrendering your policy and selling it through a life settlement, so you can make the most informed decision possible.

What Does It Mean to Surrender a Life Insurance Policy?

When you surrender a life insurance policy, you are essentially canceling it and asking the insurance company to pay you its cash value. This amount — called the cash surrender value — is calculated by the insurance company and is almost always far less than the policy is actually worth.

The insurance company has every incentive to offer you as little as possible. And because most policyholders don't know they have other options, they accept it.

What Is the Alternative?

The alternative is a life settlement — selling your policy on the open market to a licensed third-party buyer. Because multiple buyers compete for your policy, the price is driven by true market forces rather than a number set by the insurance company.

The result? Life settlements pay an average of 4 to 11 times more than the surrender value.

A Real Example

Imagine a 74-year-old woman with a $500,000 Universal Life policy. Her insurance company offers her $35,000 to surrender the policy. Through a life settlement, she receives $175,000 — five times more — as a lump sum payment, with no more premiums to pay.

This is not an unusual outcome. It happens every day for seniors who know their options.

When Does Surrendering Make Sense?

Surrendering can make sense in certain situations:

• Your policy has a very low face value (under $100,000)
• You are under age 65 and in excellent health
• The policy has no cash value and doesn't qualify for a life settlement

In those cases, surrendering or simply letting the policy lapse may be your only realistic option. But for most seniors with permanent life insurance policies of $100,000 or more, a life settlement is almost certainly worth exploring before making any decision.

What About Just Letting the Policy Lapse?

Letting a policy lapse means you stop paying premiums and the policy ends. You receive nothing. This is the worst possible outcome for most seniors — and it happens to thousands of people every year simply because they didn't know a life settlement was available to them.

How to Find Out What Your Policy Is Worth

The only way to know for certain is to request a free policy review. At Lifestone, we evaluate your policy at no cost and with no obligation. We'll tell you honestly whether you qualify and what your policy might be worth on the open market.

Request your free policy review here.

Don't make a final decision about your life insurance policy until you know all your options. A phone call or a short form could be worth tens of thousands of dollars.