Life Settlements Australia 2025: How to Sell Your Life Insurance Policy

For many Australians, life insurance is a set-and-forget financial product. But what if your policy could do more for you—right now? Life settlements are quietly revolutionising how people approach their life insurance, especially for retirees and those seeking liquidity in 2025. Here’s an in-depth look at this growing trend and what’s changed in the Australian market this year.

What Is a Life Settlement?

A life settlement is the process of selling your existing life insurance policy to a third party, typically an institutional investor, for a lump sum that’s higher than the policy’s cash surrender value but less than its death benefit. The buyer takes over premium payments and collects the payout when the insured passes away.

• Who qualifies? Traditionally, life settlements are most common among policyholders aged 65 and over, but 2025 has seen increased interest from younger Australians facing major life changes—like divorce, business exits, or health crises.

• What types of policies? Whole of life, universal life, and some term life policies with conversion features can be eligible.

While the life settlement market has long been established in the US, Australia’s industry is maturing. Recent regulatory clarity and a more robust secondary market are making this option accessible for the first time to many policyholders.

2025 Policy Updates and Market Trends

With the Australian Securities and Investments Commission (ASIC) issuing updated guidance in late 2024, the compliance landscape for life settlements has shifted. Here’s what’s new in 2025:

• Enhanced Consumer Protections: All life settlement transactions now require independent financial advice and clear disclosure of risks and fees.

• Taxation Clarity: The ATO’s 2025 ruling confirms that lump sum proceeds are typically treated as assessable income, but capital gains may apply for certain policy types. This has prompted a surge in financial planning consultations.

• Platform Growth: Digital marketplaces for life settlements—some operated by ASX-listed fintechs—have made it easier to compare offers and complete transactions securely.

Data from the Australian Life Settlements Association shows transaction volumes have doubled since 2022, with more than $600 million in policies exchanged in the last 12 months. Retirees facing rising living costs and those rebalancing their estate plans are leading this demand.

Who Should Consider a Life Settlement?

Life settlements aren’t for everyone, but they can be a strategic move for certain Australians:

• Retirees with Unneeded Coverage: If your children are financially independent or your estate plans have changed, selling your policy could unlock significant cash for retirement or medical expenses.

• Business Owners: Exiting a partnership or winding up a key person policy? A life settlement might deliver more value than surrendering your cover.

• Australians Facing Financial Hardship: With cost-of-living pressures in 2025, selling a policy can provide a much-needed liquidity boost—though it’s crucial to weigh long-term impacts.

Real-World Example: In Sydney, a 68-year-old retired teacher sold a $500,000 whole of life policy for $120,000—double the insurer’s surrender value. She used the funds to clear her mortgage and fund private aged care, illustrating how life settlements can change retirement trajectories.

However, there are risks: you give up the death benefit, and future insurability may be compromised. Policyholders should also be wary of fees, transaction costs, and the potential impact on government benefits such as the Age Pension.

How to Get Started

If you’re considering a life settlement in 2025, take these steps:

• Contact your insurer to confirm your policy’s current value and eligibility.

• Consult an independent financial adviser to assess your options and tax implications.

• Compare offers from licensed life settlement providers—look for platforms with transparent processes and solid regulatory credentials.

• Review all documentation carefully before proceeding.

Remember, a life settlement is a major decision—one that can reshape your financial future if used wisely.