Despite opportunities for improvement, the life settlement market is growing with new regulations in place. In the US, around 60 million households have a life insurance policy, an estimated $20 trillion worth of life insurance policies. Of these 60 million households, less than 10% will result in a death benefit payout from the insurance companies. In fact, most policies will simply lapse resulting in over $120 billion in face amount of policies held by seniors to simply lapse.
Every Single Year.
This “secondary market” known to consumers as life settlements and viatical settlements, provides policyholders with financial options that are usually not disclosed by the life insurance companies.
Without the life settlement option, policyholders who have paid into a policy for decades are faced with either lapsing their policy or accepting the ‘cash surrender’ value. Life settlements allow policyholders to sell their policy often for a significantly higher price.
Regulations Now Active In 45 states, 90% Of US Population
Another reason the life settlement market is expanding can be its highly-regulated status. The State Insurance Commissioners currently regulate life settlements in 45 states, an estimated 90% of the total US population are all covered by regulations and protections.
Today’s regulators, in support of policyholders selling their policies on the secondary market, have standardized contract terms and protections for all parties to the transaction, protecting both the sellers of policies, as well as the buyers.
Such regulations have resulted in increased consumer confidence as well as increased investor confidence, all contributing to the overall growth of the life settlement market with new buyers and sellers entering the market daily.
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The Evolving Rules of the Life Settlement Market
Life settlements have matured from a niche transaction into a regulated financial market touching nearly every state. But even as 45+ states now oversee the industry, the laws continue to evolve—quietly tightening consumer protections and refining what brokers and buyers can (and can’t) do.
For policyholders, these updates aren’t just legal fine print. They shape the offers you receive, the disclosures you see, and the kind of advice you can trust.
California: Expanding Disclosure Requirements (SB 255, 2023)
California has long led the way in consumer protections. In 2023, Senate Bill 255 expanded the state’s insurance disclosure rules, requiring insurers to notify policyholders over age 65 of the life settlement option before a policy lapses or is surrendered.
This means if you live in California, your insurer must tell you—clearly and in writing—that selling your policy may be an alternative to walking away with nothing.
It’s a straightforward change, but an important one: many seniors lapse valuable coverage each year simply because no one told them there was another option.
Florida: Clarifying STOLI and Rescission Rights
Florida, another high-volume life settlement state, recently updated its anti–Stranger-Originated Life Insurance (STOLI) statutes. The 2024 amendment strengthens language against speculative policy origination and refines rescission rights when fraud is discovered after a sale.
The law gives legitimate policyholders more confidence—and buyers clearer standards for due diligence. It also reduces the murky litigation risk that has historically made some investors hesitant.
New York: Tightening Advertising and Licensing Rules (Regulation 198 Enforcement)
In 2023–2024, the New York Department of Financial Services began more aggressive enforcement of Regulation 198, which governs how brokers and providers advertise to consumers.
The DFS now requires firms to clearly state whether they are acting as a broker (representing the policyholder) or a provider (buying the policy) in every ad or email.
Phrases like “guaranteed cash offer” or “instant approval” are now viewed as misleading unless backed by evidence.
This is a significant step in cleaning up the national advertising landscape—one that helps honest, licensed brokers stand out from mass-market marketing companies that often confuse or pressure seniors.
The NAIC: Preparing for Digital Modernization (2025 Review Draft)
Behind the scenes, the National Association of Insurance Commissioners (NAIC) is drafting an update to its Life Settlements Model Act, which most states use as the foundation for their own regulations.
Early reports suggest the 2025 revision will:
- Allow for secure electronic signatures and disclosures
- Introduce data privacy standards for sharing medical and financial information
- Improve reciprocity for brokers licensed in multiple states
These updates will bring the industry in line with today’s digital expectations while maintaining the strict consumer protections that define legitimate life settlement transactions.
Why This Matters for Policyholders
You don’t need to memorize state statutes to understand the takeaway:
Regulation is quietly working in your favor—forcing transparency, tightening marketing, and safeguarding sellers from one-sided deals.
But regulation alone doesn’t guarantee the best outcome. That’s why working with a licensed, independent broker matters. A broker operates as your representative, comparing offers across regulated buyers and ensuring every step complies with both state and federal standards.
At Windsor, we welcome these rules. They reinforce what we’ve always done: advocate for policyholders first, operate transparently, and reject pressure tactics. Regulation in this industry isn’t red tape—it’s reassurance.