Clear Money Guide
What this guide covers
A quick view of the questions and evidence developed below.
Guides › Life Insurance Decisions
Updated July 31, 2026. Quick answer: if you are roughly 65 or older — and especially if your health has declined since the policy was issued — a life settlement (selling the policy to an investor) can pay meaningfully more than the cash surrender value, because the buyer is pricing your death benefit, not your savings component. Below 65 and healthy, there is usually no settlement market and surrender-vs-exchange is the real comparison.
The two prices and the two tax treatments
Surrender pays cash value and is taxed in two tiers: basis back tax-free, everything above it ordinary income. A settlement pays a negotiated price and is taxed in THREE tiers under Rev. Rul. 2009-13: basis tax-free, then ordinary income up to what the gain would have been at surrender, then long-term capital gain on everything above cash value. That third tier is the tax advantage most comparison pages omit — the exact dollars that make a settlement better than surrender are taxed at capital-gain rates, not ordinary rates. Full mechanics: how settlement proceeds are taxed.
Your floor is the cash value. Your ceiling needs a market check.
Advisers who work these cases know which buyers are bidding and what multiples current cases clear. The matching service below introduces you to advisers who pay to meet you.
Before you start, what actually happens. The form is run by Kapitalwise, our advisor-matching partner. Kapitalwise sends your details to advisers who pay for the introduction, so expect calls and texts. Clear Money Guide is paid when you submit the form, whether or not you ever hire anyone. This is free to you and there is no obligation to hire anyone.
The Kapitalwise form opens here — you stay on this page.
What happens when you press the button
It asks about nine questions — age, investable assets, location — then your name, email and phone number, and verifies the phone by text. Nothing loads and nothing reaches Kapitalwise until you press the button.
How not to get skinned in the process
Settlements are a negotiated, brokered market: get multiple bids (direct buyers and brokers both), ask every broker for their commission in writing, and never let a purchaser’s “instant offer” anchor you — first offers price your impatience. The alternative worth pricing at the same time: a 1035 exchange if your goal is income rather than a lump sum, and the straight surrender math as your floor. Term policies can sometimes be settled too if convertible — ask before letting any term policy lapse at the end of level premiums.
Two doors most people are never shown: reduced paid-up keeps a smaller policy with no further premiums, and since 2010 a policy can be exchanged tax-free for long-term care coverage — though that one only opens in one direction.