Insurance Curator ORLANDO, Fla. — Facing a convergence of rising healthcare costs and persistent inflation, an increasing number of American seniors are opting to sell their life insurance policies on the secondary market rather than allowing them to lapse or surrendering them back to carriers. Industry data released in late 2024 and early 2025 indicates that these transactions, known as life settlements, have become a primary financial vehicle for funding long-term care (LTC) expenses.
The shift comes as the Life Insurance Settlement Association (LISA) reports that approximately $4.5 billion in face value was settled in the secondary market over the last year, providing billions in liquidity to policyholders. By selling a policy to a third-party investor, seniors typically receive an average of four to eight times the amount of the policy’s cash surrender value, offering a vital lifeline as the cost of assisted living and nursing home care continues to climb.
“We are seeing a fundamental shift in how retirees view life insurance,” said Bryan Nicholson, Executive Director of LISA. “It is no longer just a death benefit to be left behind; it is increasingly being recognized as a living asset that can be deployed to manage the staggering costs of aging in place or entering a care facility.”
The High Cost of Aging
The primary driver behind the growth of the secondary market is the escalating cost of long-term care. According to the 2023 Genworth Cost of Care Survey, which released updated projections for 2024, the median annual cost for a private room in a nursing home has surpassed $116,000. Home health aide services have similarly risen to over $75,000 annually.
For many seniors on fixed incomes, these costs are unsustainable. Traditionally, policyholders who could no longer afford premiums—or who no longer needed the original death benefit—would simply stop paying, causing the policy to lapse. According to industry analysis by Conning, Inc., nearly $200 billion in face value of life insurance is lapsed or surrendered annually by seniors aged 65 and older.
“Lapsing a policy is often the worst possible financial outcome for a senior,” said Michael Richmond, an industry analyst specializing in the secondary market. “When a policy lapses, the insurance company keeps all the premiums paid over the decades and pays out nothing. A life settlement returns a portion of that value to the consumer when they need it most.”
Growth in the Secondary Market
The life settlement market has matured significantly over the last decade, moving from a niche financial strategy to a regulated, transparent industry. According to Conning’s 2024 report, Life Settlements: Continued Growth Anticipated, the market is expected to see a compound annual growth rate of nearly 5% through 2028.
Institutional investors, including pension funds and private equity firms, have flooded the market, seeking the non-correlated returns that life insurance death benefits provide. This influx of capital has increased competition for policies, leading to higher offers for seniors.
“The liquidity is there, and the demand from the capital markets is robust,” said Jay Jackson, CEO of Abacus Life, one of the nation’s largest publicly traded life settlement providers. “In 2024, we saw a record number of inquiries from financial advisors who are now being mandated by their clients to find alternative sources of funding for healthcare.”
Jackson noted that the average life settlement recipient is 75 years or older and holds a policy with a face value of $250,000 or more. However, the market has expanded to include "small-face" policies as low as $50,000, making the option accessible to a broader demographic.
Regulatory and Legislative Tailwinds
The rise in policy sales is also being fueled by a changing regulatory landscape. Currently, over 40 states have specific regulations governing life settlements, providing consumer protections that were absent in the industry's early years.
Recent legislative efforts have focused on "disclosure laws." States like Florida, Texas, and Oregon have considered or passed measures requiring insurance companies to notify policyholders over a certain age that alternatives to lapsing—such as life settlements—exist.
“Consumer awareness is our biggest hurdle,” said Nicholson. “The insurance companies have a financial incentive for policies to lapse. When they are forced to disclose that a policy can be sold, the senior wins. We are seeing more states recognize that seniors deserve to know the full value of their property.”
In 2024, the National Council of Insurance Legislators (NCOIL) continued to advocate for the Life Insurance Consumer Disclosure Model Act, which aims to standardize these notifications across the country.
Impact on Long-Term Care Planning
For many families, the proceeds from a life settlement make the difference between Medicaid-funded facilities and high-quality private care.
A life settlement transaction typically takes 60 to 90 days to complete. Once the policy is sold, the new owner (the investor) assumes all future premium payments. The senior receives a lump-sum payment that can be used for any purpose, though a growing percentage of sellers are specifically earmarking the funds for "LTC Life Settlement Accounts"—a specialized trust that pays care providers directly.
“One of my clients was facing a $9,000 monthly bill for memory care,” said Sarah Jenkins, a certified financial planner based in Chicago. “Their $500,000 life insurance policy was costing them $15,000 a year in premiums that they could no longer afford. By selling the policy for $145,000, they were able to fund nearly two years of care without exhausting their other retirement savings.”
Risks and Considerations
Despite the growth, experts warn that life settlements are not a universal solution. The proceeds from a sale may be subject to capital gains taxes, and receiving a large lump sum can impact a senior’s eligibility for means-tested government programs like Medicaid.
“It is critical that seniors consult with a tax professional and a financial advisor before moving forward,” Richmond said. “While the payout is significantly higher than a surrender value, it is still less than the total death benefit. Families must weigh the immediate need for cash against the desire to leave an inheritance.”
Furthermore, the price of a life settlement is heavily dependent on the seller’s health and life expectancy. Those with chronic conditions that require long-term care often receive the highest offers because their life expectancy is shorter, making the investment more attractive to the secondary market buyer.
Looking Ahead
As the "Silver Tsunami" of aging Baby Boomers continues to place pressure on the U.S. healthcare system, the secondary market for life insurance is expected to play a permanent role in retirement planning.
Industry analysts suggest that the total addressable market for life settlements could exceed $200 billion if awareness continues to spread. For now, the trend remains clear: seniors are increasingly treating their life insurance as an essential piece of their healthcare financing puzzle.
“The days of life insurance being a 'set it and forget it' product are over,” Nicholson said. “It is an asset, and for many seniors, it is the most valuable asset they own besides their home. In today’s economy, they cannot afford to let that value disappear.”