Can I sell my life insurance policy in Canada?

Wondering if you can sell your life insurance policy in Canada? In Canada, options do exist, but they aren’t the same across the country. In Quebec and Saskatchewan, policyholders can engage in life settlements, selling an existing policy to third parties for more than its cash surrender value, even sometimes for only 10% to 50% of the face value, according to Canadian Life Settlements.

In other provinces like Ontario, it’s still illegal to sell your policy outright, though transferring it to someone with insurable interest (like a family member) is permitted. With rising premiums, aging policyholders, and changing needs, more Canadians are exploring their options. If you're one of them, here's what you need to know and how BrokerLink can help.

What is Canadian life insurance?

Life insurance is all about protecting the people you love most. In Canada, it’s a way to make sure your family has financial support if something happens to you. Basically, you pay a monthly or yearly premium to an insurance company, and in return, they promise to pay out a tax-free lump sum (called a death benefit) to your chosen beneficiaries when you pass away. That money can help cover funeral expenses, settle any debts, or support your family’s everyday living costs after you’re gone. There are two main types of life insurance in Canada:

Term life insurance

Term life insurance is the simpler, more budget-friendly option. It covers you for a set period of usually 10, 20, or 30 years. If you die during that time, your loved ones get the payout. But if you outlive the term, the coverage simply ends, and there’s no payout or built-up savings. Term insurance can be great if you just want coverage while your kids are young or while you’re paying off your mortgage.

Permanent life insurance

Permanent life insurance lasts your entire lifetime (as long as you keep paying premiums). It’s more expensive, but it also builds something called cash value over time. This cash value grows tax-advantaged and can be borrowed against or even withdrawn if needed while you’re still alive. There are two types of permanent life insurance:

• Whole life insurance

• Universal life insurance

LIMRA reports that Canadian life insurance new annualized premiums reached an all-time high of $2.04 billion in 2024, up 8% from the previous year. Whole life insurance led with $1.41 billion in premiums (a rise of 11%), universal life followed with $256 million (up 3%), while term life slipped to $372.5 million (down 2%). This data suggests Canadians are increasingly choosing permanent life insurance. For a complete guide to life insurance in Canada, contact BrokerLink.

Why might someone consider selling their life insurance policy?

There are many reasons why Canadians consider selling their life insurance policy, and it often comes down to changing priorities or unexpected life events. Here are some examples of situations where someone may consider selling their policy:

They're facing financial hardship

We all know that life can be unpredictable. Someone might face unexpected medical bills, need to cover living expenses, or want to pay off debts. In these cases, the cash value in a permanent life insurance policy can feel like a lifeline. For example, a retired couple living on a fixed income might be hit with sudden home repair costs or rising healthcare expenses. Instead of taking on new debt or dipping into retirement savings, they may choose to sell their life insurance policy to free up extra cash and stay financially stable.

They have changing family needs

Maybe your kids are grown and financially independent, or your mortgage is fully paid off. If no one relies on your income anymore, you might decide that the policy you once needed isn’t as important today. For example, a young couple who took out a large life insurance policy years ago to protect their young family, who have now built up significant savings, may no longer feel they need to rely on that coverage.

They're facing a terminal illness

Some people facing a terminal illness also look at selling their policy to access money while they’re still alive. This cash can help pay for treatment, improve quality of life, or simply allow them to enjoy their remaining time without financial stress. For example, a man in his 60s diagnosed with a terminal illness might choose to sell his policy so he can take a dream trip with his family and make home modifications to stay comfortable.

They feel they no longer need it

Some policyholders realize they simply don’t need or want life insurance coverage anymore. Premiums can get expensive as you age, and if you don’t have a clear need for the death benefit, selling the policy can feel like a practical choice. For example, a personal life insurance policy bought decades ago may no longer feel necessary to a woman with her kids all grown, and her mortgage long paid off. Instead, she may want to use that money to enjoy her retirement and help her grandchildren with school costs.

What is a life settlement in Canada?

A life settlement is what it's called when you sell your existing life insurance policy to a third party in exchange for a lump sum payment. The buyer takes over paying the premiums and receives the death benefit when you pass away. When you surrender your policy back to the insurance company, you receive what's called the cash surrender value, which is often much lower than the death benefit. However, with a life settlement, you usually receive more than the cash surrender value but less than the full death benefit amount. Here’s a quick breakdown of how a life settlement works:

Step 1: Find a buyer

Work with a broker or settlement company to find a third-party buyer interested in purchasing your policy.

Step 2: Get an offer

The buyer evaluates your policy, your age, and your health to determine an offer price.

Step 3: Transfer ownership

Once you accept an offer, ownership of your policy is transferred to the buyer. They take over premium payments.

Step 4: Receive your payment

You get a lump sum payment that you can use however you choose, whether that’s paying bills, covering healthcare costs, taking vacations, or enjoying retirement.

Can you sell your life insurance policy in your province or territory?

The truth is that whether you can or cannot sell your policy depends on where in Canada you live. Here's a provincial and territorial breakdown of where you can sell life insurance in Canada:

What to know about your coverage and contract terms

If you’re thinking about selling your life insurance policy, even if you live in Quebec and Saskatchewan, where you can legally sell your policy, it’s important to point out that not every policy is automatically eligible. There are certain contract terms and coverage details that can affect whether you can sell your policy and how attractive it might be to a buyer, such as:

Policy type

Most buyers look for permanent life insurance policies, like whole life or universal life, because these policies don’t expire as long as premiums are paid. Term life insurance isn’t typically eligible unless it includes a conversion rider. A conversion rider allows you to convert a term policy into a permanent one without additional medical underwriting. Policies that can be converted are more appealing because they can become permanent, making them more valuable to buyers.

Cash surrender value

This is the amount you’d get if you cancelled your policy directly with your insurer. Buyers generally prefer policies that have built up a significant cash value because it reflects an established investment and can make the policy more valuable to them.

Premium costs

Buyers take over paying the premiums after they purchase your policy, so if your premiums are too high, it might not be worth it for them. Lower, predictable premiums make a policy more attractive.

Age and health status

Typically, buyers prefer policies owned by older individuals or those with serious health conditions, as this means they might receive the death benefit sooner.

Contract clauses

Some policies may require approval from your insurance company for any transfer, while other policies may prohibit selling altogether. That's why it’s important to carefully review your policy terms (or have an advisor do it) to understand any restrictions you may have.

What should you consider before selling your life insurance policy in Canada?

Are you thinking about selling your life insurance policy? It’s a big decision that deserves careful thought. While it can be a good option if you’re dealing with a serious illness or finding it hard to keep up with premium payments, there are some important things to consider beforehand. Let's take a look at some commonly asked questions:

Do you need to convert your policy first?

Many Canadians indeed hold term life insurance policies. However, these policies are usually not eligible for sale because they don’t guarantee a payout. That means that if you’re interested in selling your policy, you may need to convert it into a permanent policy first. But remember, not all term policies can be converted, so you’ll first need to check if your plan has a conversion rider.

What’s your health situation?

The truth is that buyers tend to be more interested in policies held by individuals with serious health conditions or shorter life expectancies. This is because they can expect to receive the death benefit sooner.

What province do you live in?

Currently, only the provinces of Quebec and Saskatchewan allow life settlements in Canada. In other provinces, like Ontario, selling your policy to a third party is actually illegal under section 115 of the Insurance Act.

What does your insurance company allow?

Even if your province does allow life settlements, your insurance company might not. Some companies, like Sun Life, prohibit the sale of their policies even in settlement-friendly provinces.

Are there any tax implications?

A named beneficiary is typically not taxed for receiving the death benefit amount when issued upon your death. However, selling your policy is a completely different situation, and as such, it can result in taxable income. Consider speaking with a tax professional first.

How to save or maximize the value of your policy

If you’re thinking about selling your life insurance policy in Canada, it’s important to make sure you’re getting the most value possible. Here are four tips to help you out:

1. Convert your policy strategically

If you have a term policy, you may need to convert it to permanent coverage before selling. But timing is everything. Converting too late can mean higher premiums and fewer interested buyers. Make sure you understand your policy’s conversion rider and deadlines so you don’t lose this option.

2. Compare multiple offers

Just like when you're shopping for an insurance policy, don’t jump at the first offer you receive. According to the Life Insurance Settlement Association (LISA), policy values can range from 10–50% of the death benefit, with most settlements landing around 20%. By shopping around and comparing offers, you can see what different buyers are willing to pay and ensure you get a fair deal.

3. Know your market value

Understanding what your policy is truly worth helps you set realistic expectations and spot low offers.

4. Work with a broker

Life settlements are complex, and the details can get overwhelming fast. A licensed broker (like those at BrokerLink) can walk you through the fine print, explain your conversion options, and help you decide whether selling makes sense at all. They can also negotiate on your behalf to avoid lowball offers.

What are some alternatives to selling a life insurance policy?

You might find that selling your life insurance policy isn’t the right move. Or, it might not even be allowed, depending on your province or your insurance provider. If that’s the case, there are other ways to access value or reduce financial strain without giving up your coverage entirely. Here are some practical alternatives Canadian policyholders can consider:

Transfer your policy to a family member

Instead of selling, you could transfer ownership of your policy to someone who has what’s called an insurable interest. This is someone who would suffer a financial loss if you passed away. In most cases, this would be a spouse, child, or grandchild. While this doesn’t put cash directly in your hands, it can help ensure the policy stays active and benefits your family directly.

Take out a policy loan

If you have a whole life or universal life policy with built-up cash value, you may be able to borrow against it. In Canada, some life insurance companies allow you to borrow against your policy's cash surrender value minus interest, effectively letting you tap into your policy’s savings without losing coverage.

A policy loan is like borrowing from yourself. You typically won’t get taxed as long as it stays under your policy’s adjusted cost basis. Just remember that unpaid loans plus interest will reduce the death benefit later on.

Request a compassionate or living benefit

If you have been diagnosed with a terminal illness, then a compassionate payment might be an alternative to selling your life insurance policy that you can take advantage of. Some Canadian insurance providers offer a compassionate advance, which lets you access part of your death benefit early, to cover treatments or quality-of-life expenses. For example, RBC Insurance allows advances of up to 50%, maxing at $250,000.

Reduce your coverage

If the main reason is that you can no longer afford to make your monthly premium payments, consider speaking with your insurance provider to reduce your death benefit. Reducing coverage can significantly cut your monthly costs, helping you keep the policy active without sacrificing all its value. You can learn more about what mistakes to avoid when buying insurance, such as purchasing a policy you cannot afford, by contacting BrokerLink.

Cancel your life insurance policy

While not recommended, you can ultimately cancel your policy. Just keep in mind that your premium payments will have been for nothing, and your beneficiary will not receive the death benefit amount upon your death. However, if your life insurance policy is relatively new, then letting it lapse could make the most sense. A BrokerLink insurance broker can help you make this decision.

How BrokerLink can help

Life insurance can be complicated, especially if you’re thinking about selling your policy or exploring other options. That’s where BrokerLink comes in. Our brokers offer unbiased, personalized advice tailored to your unique situation, so you can feel confident in every decision you make. We help you understand the fine print and complex policy language that might otherwise leave you feeling overwhelmed. Whether it’s reviewing contract clauses, explaining cash value, or discussing conversion options, we break it all down in clear, simple terms.

Beyond the policy itself, our advisors also consider your big-picture goals, including estate planning and protecting your family’s long-term financial security. We’re here to ensure that your insurance choices fit seamlessly into your overall plan. Plus, we can even answer other questions you may have, like, “how much is life insurance?”, or “how much life insurance do I need?” When it comes to life insurance, you don’t have to figure it out alone. Speak with a BrokerLink advisor today for a free life insurance quote.

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