Why Life Settlements Are Gaining Popularity
The market for selling existing life insurance policies has grown in recent years, giving older policyowners another option to consider when circumstances change.
For decades, life insurance has generally been viewed as something designed to provide a death benefit to beneficiaries.
But an existing life insurance policy can also have value during the policyowner's lifetime.
That distinction is receiving greater attention as more policyowners, financial professionals and others become familiar with the life-settlement market.
The latest industry data show measurable growth. In 2025, members of the Life Insurance Settlement Association completed 2,955 life-settlement transactions, a 9.48% increase from 2024. Those transactions resulted in $626.6 million being paid to policyowners for policies they no longer needed.
The numbers do not mean that life settlements are appropriate for every older American, nor do they establish that a particular policy will qualify or produce a particular amount.
They do show that the market is becoming more active.
More Policyowners Are Becoming Aware of the Option
A life settlement is the sale of an existing life insurance policy to a third party for a cash payment. The amount paid is generally less than the policy's death benefit, while the purchaser assumes the rights and obligations associated with the policy under the transaction.
The National Association of Insurance Commissioners identifies a life settlement as the sale of a life insurance policy to a third party for a cash payment. NAIC consumer materials also emphasize that policyowners should understand the alternatives and consequences before entering into a transaction.
For many years, policyowners considering an unwanted policy may have thought primarily about two choices: continue paying premiums or surrender the policy.
The existence of a regulated secondary market creates another possibility for eligible policies.
That does not make the secondary market the best choice.
It simply makes it a choice worth understanding.
The Market Data Show Continued Growth
The most recent LISA data provide the clearest current measure of activity.
LISA reported that its members completed 2,955 transactions in 2025, compared with the previous year, representing a 9.48% increase.
The same data show that LISA members paid $626.6 million to consumers for policies they no longer needed. LISA also reported that consumers received nearly nine times the cash surrender value on average in those transactions, compared with just under seven times in 2024.
Those figures require an important qualification.
They represent transactions reported by LISA members, not the entire U.S. life-settlement market.
The average also should not be interpreted as a quote or expected result for an individual policy.
A policy's value depends on the specific circumstances of the insured and the policy itself.
Still, the five-year data set shows that this is not simply a handful of isolated transactions.
LISA reported that from 2021 through 2025, its members paid approximately $3.6 billion to policyowners for policies they no longer needed, involving nearly 15,000 policies.
The Financial Difference Can Be Significant
One reason the market receives attention is the potential difference between surrendering a policy and selling it.
When a policyowner surrenders a life insurance policy, the insurer generally pays the policy's cash surrender value according to the contract's terms.
A life settlement is different.
An eligible policy may be sold to a third party for a negotiated amount that can exceed the policy's cash surrender value, while remaining below the policy's death benefit.
The 2025 LISA data found that its members paid $554.6 million more to policyowners than those policyowners would have received by surrendering their policies, based on the data reported by LISA members.
That does not mean every policyowner would receive more by selling.
It means that, among the transactions represented in the data, the aggregate difference was substantial.
For an older policyowner, that can make the question of surrender versus settlement worth examining before making a final decision.
Older Policies Can Become More Relevant as Circumstances Change
Life insurance policies can remain in force for decades.
During that time, the circumstances that originally justified the coverage can change.
Children may become financially independent.
A mortgage may be paid off.
A spouse may die.
An estate plan may change.
Retirement may alter household income and expenses.
The policyowner may simply decide that the original reason for maintaining the coverage no longer exists.
None of those changes automatically means the policy should be sold.
But they can create a reason to review it.
NAIC consumer guidance encourages policyowners to assess their current life insurance needs and understand the implications of dropping a policy after it has been purchased.
A life settlement can therefore enter the conversation as part of a broader review rather than as an automatic recommendation.
The Policy Itself Is an Asset
The growing discussion around life settlements also reflects a broader change in how an existing life insurance policy can be viewed.
A permanent life insurance policy can contain cash value and provide a death benefit. Depending on the policy, it may also have surrender value, outstanding loans and other financial characteristics.
The NAIC specifically encourages consumers to understand their existing coverage and the consequences of changing or dropping a policy.
The secondary market adds another dimension.
Instead of viewing an unwanted policy only as something that can be surrendered, a policyowner may be able to determine whether the contract has value to another buyer.
That is one reason life settlements have increasingly become part of discussions about older life insurance policies.
Investors Have Also Continued to Follow the Market
Policyowners are only one side of the life-settlement market.
Investors purchase qualifying life insurance policies because the policies represent financial assets with future cash flows tied to insurance benefits and premium obligations.
Conning's most recent life-settlement study describes the sector as a secondary market for insurance products and identifies multiple factors behind its longer-term growth outlook. Its research also notes that the market experienced a pause in 2024 while continuing to examine the forces supporting future growth.
That distinction matters.
The market's growth is not simply a story about consumers discovering an additional source of cash.
It is also a market in which institutional and other investors evaluate life insurance policies as an asset class.
That investor interest helps create the marketplace in which policyowners can receive competing offers for eligible policies.
The Aging of Existing Policyowners Matters
Life settlements generally concern existing life insurance policies, which means the market is connected to the large population of Americans who already own coverage.
The issue is therefore different from selling a new insurance product.
The policy already exists.
The premiums may already have been paid for years.
The insured may now be much older than when the policy was issued.
And the financial purpose of the policy may have changed.
That combination can make an older policy more likely to be reviewed for alternatives.
It does not, however, mean that age alone determines whether a policy qualifies for a settlement.
Eligibility depends on the policy and the circumstances of the insured and transaction.
The Conversation Is Moving Beyond “Keep or Surrender”
For many policyowners, the traditional decision has been straightforward.
Keep the policy and continue paying for the coverage.
Or surrender it and receive the available cash surrender value.
Life settlements introduce a third possibility for eligible policies: evaluate whether another party is willing to purchase the policy for more than its surrender value.
That additional option is one of the most important reasons the market deserves attention.
A policyowner does not have to sell simply because a settlement offer is available.
The value of the process can also come from discovering what the market would pay and comparing that figure with the economic value of keeping the policy.
A Settlement Has Tradeoffs
The growth of the market should not obscure the fact that selling a policy is a significant financial decision.
The policyowner gives up the policy and its future death benefit in exchange for the settlement proceeds.
The transaction can also have tax consequences and may affect government benefits or other financial considerations depending on the circumstances.
NAIC materials specifically advise consumers to understand alternatives, risks and tax consequences before entering into a life-settlement transaction.
State laws and regulations also vary.
Life settlements are regulated transactions, and policyowners should understand the rules that apply to their particular situation.
The right question is therefore not simply whether someone can sell a policy.
It is whether selling it makes sense after the alternatives have been examined.
Why the Market Is Getting More Attention Now
The strongest evidence for growing popularity is the activity itself.
LISA's reported transactions increased by 9.48% in 2025.
The amount paid to consumers reached $626.6 million.
The organization also reports approximately $3.6 billion paid to policyowners by its members over the five years from 2021 through 2025.
Those figures demonstrate increased activity within the LISA-reported market.
They do not prove that one single factor caused the growth.
Instead, the market appears to be benefiting from several developments occurring at the same time: greater awareness of the secondary market, a growing recognition that existing life insurance can have value beyond its surrender value, continued investor participation and a large population of existing policyowners reaching the stage of life when financial priorities often change.
Those are market conditions, not guarantees.
The Most Important Question May Be the Simplest
For an older American who owns a life insurance policy that is no longer clearly needed, the first question does not have to be:
“Should I sell it?”
It can simply be:
“What is this policy worth today, and what are my options?”
That means understanding the current death benefit, cash surrender value, premiums, policy loans and other relevant provisions.
It also means understanding whether the coverage still serves a purpose.
Only then does it make sense to compare keeping the policy with other alternatives, including a potential life settlement where appropriate.
Life settlements are gaining attention because the market is becoming more active and because more people are recognizing that an existing life insurance policy may have financial value during the policyowner's lifetime.
But popularity should never replace analysis.
For an older policyowner, the value of a life settlement is ultimately not that it is popular.
It is that it gives an eligible policyowner another option to evaluate before making a decision about an asset they may have owned for decades.
Editorial Disclosure
The Senior Ledger publishes independent educational journalism about the financial and lifestyle issues affecting older Americans. Rob Haynie is a life-settlement industry executive and a close business partner of The Senior Ledger. His professional background and industry perspective are disclosed because they are relevant to this article. This article is intended for general informational purposes and does not constitute financial, tax, legal, insurance or investment advice. Individual circumstances, policy terms, transaction eligibility, tax treatment and applicable state laws vary.