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Sale Of A Life Insurance Policy (Viatical, Life And Senior Settlements)

What Kind Of Life Insurance Policies Can And Cannot Be Sold?

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In order to be salable, purchasers look at the type of policy, the insurance company rating, whether the policy is subject to a contestable and suicide exclusion, whether there are any liens against the policy, and whether it is assignable.

Type of policy

Generally, any type of life insurance policy is salable, with a few exceptions. It doesn't matter if the policy is term life insurance or if it's a permanent policy. In theory it also doesn't matter if the life insurance is individual or group. In reality, buyers of group policies are a very small segment of the purchasing market.

With respect to specific policies about which there may be questions:

  • Savings Bank Life Insurance (SBLI) policies are generally salable.
  • Federal law permits the sale of Federal Employees' Group Life Insurance (FEGLI).
  • Servicemen's Group Life Insurance (SGLI) and Veteran's Group Life Insurance (VGLI) are salable by converting the coverage from group to individual. The individual policy would then be salable.
  • Credit Life Insurance is not salable.

Insurance Company rating

The insurance company issuing the policy must usually be rated A minus or better by a rating service such as Best's. Purchasers will consider

policies which are issued by less financially secure companies if the amount of the death benefit is equal to or less than the maximum insured by the guarantee fund in the state.

Contestable and suicide exclusion periods

The policy must be beyond the contestable period and the suicide exclusion period.

  • The contestable period is the period just after a policy is issued during which the insurance company can contest validity because of a misstatement on the part of the insured or for fraud.
  • The suicide period is the period just after the issuance of a life insurance policy during which the insurance company will not pay any benefit in the event of suicide - except possibly a return of premiums that were paid.
  • The contestable period and suicide exclusion period usually run during the same period of time -- which is generally two years from the date the policy is issued.

If a contestable clause and suicide exclusion is the result of a conversion to an individual life insurance policy from a group life insurance policy:

  • Ask your state Department of Insurance if these provisions can be enforced when an individual policy is converted from a group policy.
  • Even if state law does not prohibit imposing a new contestable or suicide clause, ask the insurance carrier to waive the provisions. They are likely only in the policy because it is of the standard off-the-shelf variety, rather than a policy created for people who convert from group coverage. The reason for their inclusion in individual policies doesn't fit this situation.


The policy must be free of any liens. In this situation, a lien is a claim against the death benefit. For example, lien exists if you gave a creditor a right to receive part of the proceeds of your life insurance policy if you die still owing any part of a debt.


There must be an ability to assign ownership of the policy. Some policies specifically prohibit assignment.

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