Ben Nguyen 
Selling life insurance policy, also known as life settlement, occurs when a policyholder sells their policy to a third party for immediate cash. The buyer takes over responsibility for paying premiums and receives the full death benefit when the original policyholder dies.
In Canada, the rules and regulations surrounding life settlements are complex and vary widely depending on the province. Some provinces, like Ontario, have repeatedly tried and failed to pass legislation fully legalizing life settlements, facing strong resistance from insurance companies.
Our LifeBuzz guide will provide up-to-date information on whether and how you can legally sell your Canadian life insurance policy in 2025.
Can You Sell Your Life Insurance Policy in Canada?
Whether you can legally sell your life insurance policy in Canada depends on four important factors:
Provincial Regulations
Life settlement regulations vary by province. In Quebec and Saskatchewan, life settlements are fully legal and regulated. British Columbia also allows life settlements but without formal regulations.
In 2020, Nova Scotia and New Brunswick officially banned life settlements until more consumer protections are implemented in their insurance laws.
Ontario has seen multiple failed attempts to formally legalize and regulate life settlements over the past decade, facing strong resistance from large insurance companies who argue it will hurt consumers. The insurance industry, represented by the Canadian Life and Health Insurance Association (CLHIA), continues to aggressively lobby the government against life settlement legislation.
Without clear legal frameworks, policyholders in provinces like Ontario, Alberta and Manitoba can still sell their policies but operate in a legal gray area.
Age and Health
Your age and current health status are important in determining the feasibility of selling your particular life insurance policy.
Generally, younger and healthier policyholders have a harder time selling their policies for a reasonable price. Seniors over age 65 with declining health tend to have an easier time finding interested buyers and securing better offers for their policies.
Insurance Company Restrictions
Some of Canada’s largest insurance providers, such as Sunlife, Manulife, and RBC Insurance, have internal policies that prohibit life settlements under any circumstances.
Even seniors in poor health cannot sell their policies issued by one of these companies. Check your policy documents or ask your provider if they allow third-party sales.
Type of Life Insurance Policy
Permanent life insurance policies that accumulate cash value, such as whole life, universal life and guaranteed universal life, are much easier to sell than basic term life insurance policies. Most term life policies do not have provisions that allow selling to an outside investor or third party.
Converting a term policy to permanent coverage opens up the possibility of a life settlement. However, it can be difficult to qualify for permanent life insurance after the onset of health conditions and advancing age.
Why Would You Want to Sell Your Life Insurance Policy?
There are two main reasons a Canadian policyholder may want to go through the complex process of selling life insurance policy:
Inability to Pay Premiums
Many seniors living on fixed incomes eventually struggle to pay their expensive life insurance premiums after retirement. By selling life insurance policies for an upfront lump payment, they can alleviate the ongoing financial burden of unaffordable premiums.
Immediate Access to Cash
Selling a permanent life insurance policy allows you to access a portion of the death benefit while still alive. This influx of cash can help the insured pay off debts, cover emergency costs, or afford expensive medical treatments.
Take the example of a 75-year-old woman facing $50,000 in unexpected medical bills not fully covered by provincial healthcare or her insurance plan. She owns a $100,000 permanent life policy. By selling life insurance policy, she can immediately access up to 60% of the $100,000 death benefit, providing the funds she desperately needs.
Who Can Buy Your Life Insurance Policy in Canada?
If you decide to sell your life insurance policy, there are two potential types of buyers to be aware of:
Institutional Investors
This includes dedicated life settlement companies, specialty asset management firms, private equity funds, and even some insurance companies, which see value in buying policies as profitable investments.
Individual Investors
These are private, high-net-worth individuals who wish to purchase a life insurance policy for personal investment purposes. They often include family members, business partners, or financial backers who have an insurable interest in the policyholder.
How To Sell Life Insurance in Canada?
If you decide to sell your life insurance policy, follow ten key steps:
Convert Term Life Insurance to Permanent Coverage First
If you currently have term life insurance, you must convert your term policy to a permanent one. Term policies generally cannot be sold on their own to investors. Converting to whole life, universal life, or another permanent policy also increases cash value.
Understand the Tax Implications
Death benefit payouts are not taxed, but proceeds you receive from a life settlement are considered taxable income for the seller.
You may owe capital gains tax on the amount you receive over your policy’s cost basis. Consult a tax advisor beforehand.
Find an Experienced Independent Life Settlement Broker
An experienced life settlement broker acts as your agent and advocate. They will professionally package and market your policy to interested buyers, help you negotiate the best price, and handle all legal documentation.
You may expect to pay a broker commission of 10-40% on the sale.
Gather Important Documents Regarding Your Policy
Locate details like your policy type, monthly premium, death benefit amount and contact information for the insurance company.
After that, your broker will use these to create professional bid packages to generate investor interest.
Complete the Broker’s Life Settlement Application in Detail
This initial application asks for your personal, financial and medical details so that your broker and potential buyers can accurately assess your policy’s current value based on your life expectancy. Be honest about your health and medical history.
Provide Access to Your Medical Records
Sign authorization so your broker can retrieve your medical records. Buyers will analyze these and your current prescriptions to gauge your health status. Refusing access hurts your ability to get offers.
Potentially Get a Life Expectancy Evaluation Done Professionally
Some brokers may ask you to undergo an exam and evaluation with a medical professional to definitively determine your life expectancy based on health and age. This provides a more accurate policy valuation.
Wait for the Underwriting Process by the Buyer
It takes time for interested buyers to thoroughly underwrite and evaluate your policy for bid consideration based on your age, medical status and life expectancy.
Underwriting verifies all information you provided is true and accurate. Attempting to hide current health conditions could be considered fraudulent.
Review Multiple Offers and Negotiate the Best Deal
Once underwriting is completed, the buyers extend formal offers based on their appraisal of your policy’s worth. Your broker will help you understand and compare these bids. Negotiate for the highest lump-sum payment before accepting a deal.
Finalize Required Paperwork and Receive Your Payout
Your broker will facilitate the paperwork required by the chosen buyer. Once the sale closes and the buyer takes ownership, you receive the agreed-upon payment amount.
Key Considerations Before Selling Life Insurance Policy
If considering selling life insurance, keep these important factors in mind:
- Your current health and realistic life expectancy greatly impact how much your policy can sell for. Be honest with yourself and potential buyers about your health status.
- Take time to get quotes from multiple reputable brokers and policy buyers. Compare all offers and negotiate the best possible deal.
- In most cases, the entire life settlement process takes several months to complete, including underwriting and finding a buyer.
- Carefully weigh alternatives like accelerated benefits, policy loans and ownership transfers before committing to selling life insurance.
- Consult tax and legal professionals to ensure you comply with laws and understand tax implications.
- An experienced, independent broker maximizes your payout and avoids potential scams.
What Are The Alternatives to Selling Your Life Insurance Policy?
Before making the big decision to sell your life insurance coverage, be sure to explore alternative options with your insurance advisor:
Let Your Policy Lapse
If your life insurance policy is relatively new or has low cash value, letting it lapse may be the most practical option to alleviate the financial burden. Stop paying premiums, and your coverage will terminate. This avoids broker commissions and fees from doing a life settlement.
Accelerated Death Benefit
If diagnosed as terminally ill, you may qualify to access 50-95% of your total death benefit early via an accelerated death benefit rider on your permanent life policy. This provision gives you the cash you need without selling your life insurance policy entirely.
Reduce the Coverage Amount
Ask your insurance provider if they can reduce the death benefit on your policy. Lowering your coverage lowers your monthly premium to a more affordable level, allowing you to keep the policy active.
Transfer Ownership
You can transfer legal ownership of your life insurance policy to another person, such as a spouse, parent or adult child. This keeps the policy active but removes the premium payment burden from you.
Take Out a Policy Loan
Many whole life and universal life policies allow you to borrow against the cash value built up in the policy over time. This policy loan gives you cash now while the loan balance gets deducted from your eventual death benefit.
The bottom line
Selling your life insurance policy through a carefully orchestrated life settlement contract can make sense as a last resort given certain situations, such as unaffordable premiums or the immediate need for cash.
However, caution must be taken to avoid scammers in this complex process. Be sure to work only with reputable, licensed brokers who put your best interests first.
Understand all your alternatives, negotiate the maximum payout, and close the deal only once you’re comfortable proceeding. With proper guidance and patience, selling your life insurance policy can provide much-needed retirement funds.
FAQs on Selling Life Insurance Policies in Canada
How long does it take to sell a life insurance policy in Canada?
The entire life settlement process typically takes a minimum of 4-6 months from start to finish. It takes time for brokers to market your policy, for buyers to underwrite and evaluate it, negotiate offers, and finalize all legal paperwork. Expect anywhere from 6 months to a year.
Where can I find buyers interested in buying life insurance policies in Canada?
Specialized life settlement firms like Coventry First are the main institutional buyers. You can also work with an experienced broker who already has relationships with various private equity firms, hedge funds, and high-net-worth individuals looking to invest in life settlements.
What percentage of the death benefit can I expect to receive when I sell my life insurance policy?
For seniors over 65 who are in poor health, you may receive up to 70% of the total death benefit. However, younger or healthier policyholders expect closer to 30-40% of the total benefit. The offer depends on your specific age, health prognosis, and type of permanent policy.
Do I need to pay taxes on the money I get from selling life insurance policy?
Yes, proceeds from a life settlement in Canada are considered taxable income for the policy seller, unlike the tax-free death benefit your beneficiary would receive. Consult a tax advisor to understand the implications of capital gains.
Can I sell my life insurance policy if I'm not a senior citizen?
Yes, policies can be sold by younger individuals, too. However, seniors over 70 tend to get better offers since their life expectancy is lower, increasing the policy's investment value for buyers. Under 60, expect very low offers.
What documents do I need to provide to sell my life insurance policy?
You'll need to provide your policy documentation, medical records release form, ID, contact info for your insurance provider, and detailed personal/financial info. Failure to provide full documentation can hurt offer amounts.
Do I have to pay commissions or fees when I sell my life insurance policy?
Yes, you will pay a broker commission of 10-40% on the total amount of your life settlement. This compensates them for marketing your policy, finding buyers, and handling legal work. There may also be various transaction fees.
Can I sell a term life insurance policy?
Most term policies cannot be sold. You would need to first convert your term policy to whole life, universal life, or another permanent insurance product before selling it through a life settlement would be possible.
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