What are Nevada's rules for selling a life insurance policy?

Yes, Nevada allows policyholders to sell their life insurance policies through viatical settlements and life settlements, subject to regulation by the Nevada Division of Insurance under NRS Chapter 688C.

A life settlement allows a policyholder to sell their policy to a licensed investor for a lump-sum payment greater than the policy's cash surrender value but less than the death benefit. The investor continues paying premiums and eventually collects the death benefit.

Nevada requires life settlement providers and brokers to be licensed by the Nevada DOI. Sellers should verify the license of any settlement company or broker before proceeding. The state also mandates specific disclosures to policyholders, including explanation of alternatives.

Viatical settlements specifically apply to terminally ill or chronically ill policyholders who receive an accelerated benefit reflecting their shortened life expectancy. Viatical settlement proceeds for terminally ill policyholders are generally tax-free under federal law.

Life settlements for non-ill policyholders are taxable: the amount received above the policy's cost basis (total premiums paid) may be subject to capital gains tax, and any amount above the cash surrender value is taxed as ordinary income.

Life settlements represent one option when coverage is no longer needed. Other options include: surrendering for cash value, exchanging for a reduced paid-up policy, or allowing the policy to lapse. A financial advisor can help evaluate which option serves your specific situation best.