Selling vs. surrendering a life insurance policy
Surrendering returns the cash value the insurer has already set aside. Selling puts the policy in front of buyers who may pay several times that amount.
Most people who stop paying for a life insurance policy either let it lapse — receiving nothing — or surrender it to the insurance company for its cash surrender value. A third option exists: selling the policy on the secondary market. The difference in what you receive can be substantial.
The figures below are 2025 industry averages reported by the Life Insurance Settlement Association across thousands of transactions. They are not offers or predictions for any specific policy.
| Let it lapse | Surrender it | Sell it | |
|---|---|---|---|
| What you receive | $0 | Cash surrender value (CSV) | Settlement proceeds — typically 20–25% of the death benefit |
| 2025 average payout | Nothing | $24,360 | $212,066 |
| Who decides the amount | N/A | The insurance company | Competitive bids from multiple institutional buyers |
| What happens to the policy | Cancelled | Cancelled | Transferred to the buyer, who takes over premiums and collects the death benefit |
| Effect on beneficiaries | Coverage ends | Coverage ends | Coverage ends — the buyer becomes the beneficiary |
| Tax treatment | None | Gain above basis may be taxable | Proceeds above basis are taxable; portion above CSV taxed as ordinary income |
| Time to receive funds | Immediate (nothing) | Days to weeks | 60–90 days typically |
Lapse
$0
Surrender
Cash surrender value (CSV)
Sell
Settlement proceeds — typically 20–25% of the death benefit
Lapse
Nothing
Surrender
$24,360
Sell
$212,066
Lapse
N/A
Surrender
The insurance company
Sell
Competitive bids from multiple institutional buyers
Lapse
Cancelled
Surrender
Cancelled
Sell
Transferred to the buyer, who takes over premiums and collects the death benefit
Lapse
Coverage ends
Surrender
Coverage ends
Sell
Coverage ends — the buyer becomes the beneficiary
Lapse
None
Surrender
Gain above basis may be taxable
Sell
Proceeds above basis are taxable; portion above CSV taxed as ordinary income
Lapse
Immediate (nothing)
Surrender
Days to weeks
Sell
60–90 days typically
Source: Life Insurance Settlement Association, 2025 Annual Market Data, 19 May 2026.
When surrendering makes sense
Surrendering can make sense when the policy has a meaningful cash value, the face amount is below $100,000, the insured is under 65, or the health situation does not meet the threshold buyers require. In those cases, the secondary market is unlikely to produce a better offer and the surrender value is the realistic ceiling.
When selling makes sense
Selling tends to produce a materially better outcome when the face amount is $100,000 or more, the insured is 65 or older, there has been some change in health since the policy was issued, and the policy type is universal life, whole life, or a convertible term. The larger the face amount and the older the insured, the wider the gap between surrender value and what buyers will pay.
Find out which option applies to your policy.
We can usually tell you in one conversation whether your policy is likely to attract buyers and what range of proceeds is realistic.