Many retirees overlook the potential value of selling their permanent life insurance policies on the secondary market, where they can often fetch significantly higher bids than current surrender values, shedding light on an underappreciated asset in retirement financial planning.
For many retirees, the household balance sheet looks impressively complete on a financial dashboard. Investment accounts update, home values are estimated and recurring bills are tracked. But one common holding often sits outside the picture: a permanent life insurance policy, which is usually shown only as a premium payment or, at best, as its cash surrender value rather than what it might fetch in the secondary market.
That omission matters because a life insurance policy can be sold. The right to transfer ownership was established more than a century ago, after the Supreme Court’s decision in Grigsby v. Russell. Since then, a specialised market has developed in which institutional buyers purchase policies, take over the premiums and later collect the death benefit. Yet the value in that market cannot be pulled from a simple data feed, because pricing depends heavily on underwriting, especially the health of the insured person.
That is why the figure reported by an insurer is often the wrong number to use when judging a policy’s worth. The cash surrender value is the amount the carrier will pay to end the contract early. It is not the same as a third party’s bid. In many cases, the gap is large. A policy worth $500,000 might return only a modest surrender payment from the insurer, while a life settlement could produce several times more.
Recent market data from the Life Insurance Settlement Association underline that gap. In 2025, policyholders who sold through its members received an average of $212,066, while insurers’ average surrender value was $24,360 for the same policies. That means sellers received nearly nine times as much on average by going to the secondary market. Insurance Forums and other industry outlets reported the same figures, and noted that the average surrender value fell sharply from the prior year.
The catch is that not every policy will attract serious bids. Buyers tend to favour insureds who are at least 65, with face amounts of $100,000 or more, and term policies only qualify if they remain convertible to permanent cover. A policy on a healthier insured may draw little interest, while one tied to declining health can become more valuable because the expected payout is closer. That inversion can make the market hard for owners to recognise at the very moment it matters most.
There is also a broader information problem. Nothing obliges an insurer to mention that a policy might be worth more to a third party than in surrender. Many owners simply do not know a sale is possible. FINRA has said the challenge is less finding a buyer than knowing whether the price offered is fair, which is why shopping around matters. In practice, that usually means working through a broker or other intermediary that can solicit bids from multiple institutional buyers.
For financial software, the limitation is structural rather than careless. Aggregators can display what is reported directly by banks, brokers and insurers, but they cannot easily price something that depends on private medical underwriting and a competitive bidding process. So the retirement dashboard remains precise about balances it can see and blind to the policy line that may be the most mispriced asset on the page.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
