Insurance Curator ORLANDO, Fla. — As persistent inflationary pressures continue to erode the purchasing power of fixed-income retirees, a growing number of American seniors are turning to the secondary market for life insurance to bolster their retirement portfolios.
Financial advisors and industry analysts report that life settlements—the sale of an existing life insurance policy to a third party for a one-time cash payment—have emerged as a critical liquidity tool in 2024 and 2025. This shift comes as high interest rates and the rising cost of healthcare force older Americans to re-evaluate underutilized assets to maintain their standard of living.
A life settlement typically yields a payout that is significantly higher than the policy's cash surrender value, though lower than the total death benefit. For many seniors, the transaction offers a way to eliminate costly premium payments while unlocking immediate capital to fund long-term care or supplement depleted 401(k) accounts.
Market Growth and Economic Drivers
The secondary market for life insurance has seen a steady upward trajectory. According to the most recent annual report from Conning, an investment management firm that tracks the industry, the face value of life insurance policies settled in the secondary market has grown consistently, with projections suggesting the market will continue to expand at a compound annual growth rate of roughly 5% through 2028.
"We are seeing a fundamental shift in how life insurance is viewed—not just as a death benefit, but as a flexible fiduciary asset," said Bryan Nicholson, Executive Director of the Life Insurance Settlement Association (LISA). "In an environment where the dollar doesn't go as far as it did three years ago, the ability to harvest the value of an unneeded policy is a game-changer for many families."
According to LISA data, approximately $100 billion in face value of life insurance is lapsed or surrendered by seniors over the age of 65 every year. Industry advocates argue that many of these policyholders are walking away from significant wealth simply because they are unaware that a secondary market exists.
The Inflation Factor
Inflation has acted as a double-edged sword for retirees. While it has increased the cost of essential goods, it has also led to higher interest rates, which can make the premiums on certain types of flexible-premium life insurance policies more expensive to maintain.
"Many seniors purchased universal life policies decades ago with projections that assumed certain interest rate environments," said Michael Richmond, an independent financial consultant specializing in elder care. "As inflation spiked, the cost of insurance within those policies often rose, leading to 'premium shock.' Rather than letting the policy lapse and getting nothing, the secondary market provides an exit strategy that preserves the equity they’ve built."
For institutional investors, life settlements represent a "non-correlated" asset class, meaning their value does not fluctuate based on the volatility of the stock market or traditional economic cycles. This has attracted significant capital from hedge funds and private equity firms, including major players like Apollo Global Management and Blackstone, who see the asset class as a hedge against market instability.
Institutional Appetite and Asset Stability
The influx of institutional capital has brought increased transparency and regulation to the market. Currently, more than 90% of the U.S. population is protected by comprehensive life settlement regulations, providing a layer of security for consumers that did not exist twenty years ago.
"The entry of large-scale institutional buyers has professionalized the space," said John Kelly, a senior analyst at Asset Equity Groups. "It has created a more competitive bidding environment for policies, which ultimately benefits the consumer. When multiple providers are bidding on a policy, the senior receives a more fair market value."
In late 2024, the market saw a notable increase in "smaller" policy settlements—those with face values under $500,000. Previously, the secondary market focused primarily on multi-million dollar policies held by high-net-worth individuals. However, technological advancements in life expectancy underwriting have made it economically viable for providers to purchase smaller policies, opening the tool to a broader segment of the middle class.
Consumer Protections and Disclosure
Despite the growth, consumer advocates emphasize the importance of due diligence. Selling a life insurance policy is a significant financial decision that can have tax implications and may affect eligibility for certain state-sponsored assistance programs like Medicaid.
The National Association of Insurance Commissioners (NAIC) has encouraged states to adopt disclosure laws that require insurance companies to inform policyholders of alternatives to lapsing a policy. To date, several states, including Oregon and Maine, have considered or passed legislation that mandates insurers notify seniors about life settlements when they indicate they can no longer afford their premiums.
"The goal is transparency," Nicholson of LISA added. "A consumer shouldn't be allowed to throw away an asset without knowing it has value. You wouldn't throw away a deed to a house just because you couldn't pay the property taxes; you would sell the house. Life insurance should be treated the same way."
Looking Ahead
As the "Silver Tsunami"—the aging of the Baby Boomer generation—continues, the demand for retirement liquidity is expected to hit record levels. With an estimated $20 trillion in life insurance currently in force in the United States, the untapped potential of the secondary market remains vast.
Market analysts predict that if inflationary cycles remain prolonged, the life settlement industry will transition from a niche financial product to a mainstream component of retirement planning. For the millions of Americans entering their 70s and 80s with declining cash reserves, their life insurance policy may prove to be the most valuable "hidden" asset in their portfolio.
"We are moving toward a period where the life settlement is a standard conversation during a quarterly review with a financial advisor," Kelly said. "In a world of 4% or 5% inflation, ignoring the secondary market is no longer a luxury seniors can afford."
About the Data:
Statistics regarding market growth were sourced from Conning’s "Life Settlements: The Growth Opportunity Continues" report. Consumer protection information was verified through the Life Insurance Settlement Association (LISA) and the National Association of Insurance Commissioners (NAIC).