A sale is one option among six, and on a second-to-die contract it is frequently not the best one — so the useful exercise is ranking all six rather than pursuing the first. Colonial Life & Accident Insurance Company has been based in Columbia, South Carolina since 1939 and has been part of Unum Group since Unum acquired the Colonial organization in 1993. Its business is voluntary benefits sold at the workplace through one-to-one enrollment: accident, disability, critical illness, hospital indemnity, cancer coverage, and life. Households that enrolled through an employer often hold several small contracts and are not certain which is which.
That is the first thing to sort out, because a survivorship contract is an estate-planning instrument and looks nothing like a worksite accident policy. Once you have confirmed what you hold, the honest sequence is to compare what the contract can do internally — reduce the face amount, go paid-up, take extended term — against what an outside transaction might produce, and only then decide.
Where a genuine second-to-die contract exists, the joint-life structure pushes offers down for two independent reasons explained below. Neither is a reflection on the carrier. Both are structural, and knowing them up front saves months. Pine Lake Life Solutions provides education and a free policy review only, and does not give legal, tax, or investment advice.
In This Article
- Sort the Worksite File First
- Why a Second-to-Die Contract Prices Low
- Option One: Lower the Death Benefit
- Option Two: Reduced Paid-Up or Extended Term
- Option Three: A Retained Death Benefit Arrangement
- Option Four: Gift the Policy to a Charity
- Option Five: Transfer Within the Family
- What a First Death Changes
- Ownership, Contestability, and South Carolina
- Frequently Asked Questions
Sort the Worksite File First
Lay out every contract and read the first page of each. You are looking for four categories. Supplemental health products — accident, critical illness, hospital indemnity, cancer — pay stated benefits on defined events and have no death benefit to sell. Disability income replaces earnings and likewise has nothing to transfer. Term life pays a death benefit but generally has no cash value and can only be sold if a conversion right is still live. Permanent life — whole life or universal life — has a schedule of values and is the only category where a settlement conversation is possible.
Within permanent coverage, confirm whether you hold a survivorship contract. It shows two insured names, one policy number, one face amount, and benefit language referring to the death of the survivor or the second death. Two separate policies on two spouses have separate numbers and are valued independently, which is usually the friendlier situation because single-life pricing is better.
Also confirm whether the contract is individual or a certificate under an employer’s group plan. Worksite products are frequently individual and portable, meaning the coverage continues at your own expense after employment ends, but not always. A group certificate generally cannot be assigned to a buyer.
Why a Second-to-Die Contract Prices Low
A buyer values a policy by estimating how long premiums must be funded before the death benefit arrives and discounting that benefit back at a required rate of return. On one insured, the estimate comes from medical records reviewed by specialist underwriting firms, usually two reports which the buyer blends.
A survivorship contract requires that exercise for both insureds, combined into a joint survival curve, because nothing is payable until the second death. The healthier insured therefore governs the value: combining a short life expectancy with a long one produces a joint expectation near the longer figure, not an average. Owners routinely assemble a thick medical file on the less healthy spouse expecting it to be decisive and find that it barely moves the number.
The second reason is market structure rather than mortality. A meaningful share of institutional buyers exclude joint-life contracts by mandate because two-life mortality is harder to reserve against and produces lumpier cash flows. Fewer bidders means less competition and a lower clearing price. Our survivorship overview covers what a properly canvassed file looks like.
Option One: Lower the Death Benefit
On a universal life chassis, reducing the face amount reduces the cost-of-insurance charges, which reduces the premium required to keep the contract in force. For a household whose estate exposure shrank but did not vanish, a smaller policy at a sustainable premium is frequently better than either keeping the full amount or giving up the coverage entirely.
Three cautions. Ask what a face reduction does to any secondary or no-lapse guarantee, because on some designs the guarantee recalculates or is lost. Ask whether the reduction triggers a surrender charge. And ask whether it affects the contract’s status under the modified endowment rules, since a reduction in benefit can cause a contract to be retested.
Get the numbers in writing at two or three different face amounts before choosing one. Our comparison of lowering the death benefit versus selling lays out when each wins.
Option Two: Reduced Paid-Up or Extended Term
On a whole life chassis, the nonforfeiture provisions give you two contractual choices that cost nothing to request. Reduced paid-up converts the contract to a smaller death benefit guaranteed for life with no further premiums ever due. Extended term keeps the full face amount but only for a defined number of years, after which coverage ends.
Reduced paid-up is usually the better choice for a survivorship contract, because the whole point of second-to-die coverage is that it must still exist at a distant second death. Extended term that expires at the survivor’s age 84 does not solve that problem. See how reduced paid-up works.
Request both figures in writing before deciding anything else. They set the floor for every other option: if the paid-up benefit is meaningful and free, any transaction has to beat it, not merely beat zero.
| Option | Cash Now | Coverage Kept | Premium After | Best When |
|---|---|---|---|---|
| Keep paying | None | Full | Unchanged | Guarantee intact and affordable |
| Lower the death benefit | None | Reduced | Lower | Exposure shrank but did not vanish |
| Reduced paid-up | None | Smaller, guaranteed for life | None | Premium is a strain, coverage still wanted |
| Retained death benefit | None | Defined portion | None | Cannot pay, want heirs to receive something |
| Charitable gift | None | Charity’s | Charity’s | Genuine charitable intent |
| Life settlement | Lump sum | None | None | Face above $100,000 and purpose is gone |
Option Three: A Retained Death Benefit Arrangement
In a retained death benefit structure, the owner transfers the policy to a buyer who assumes all future premiums, and the original beneficiaries keep a guaranteed portion of the death benefit rather than the seller receiving cash. There is no lump sum. What is eliminated is the premium obligation, and what is preserved is a defined benefit for the family.
This suits a specific household: one that cannot sustain the premium, does not urgently need cash, and wants the beneficiaries to receive something rather than nothing. It is not available from every buyer and not on every contract, and the retained percentage varies widely. Read how a retained death benefit works before assuming it is available.
Ask for it explicitly if it fits your situation. A file shopped only for cash offers will not surface this structure on its own.
Option Four: Gift the Policy to a Charity
A permanent policy can be transferred to a qualified charity, which becomes owner and beneficiary and takes over the premiums or surrenders the contract. For a donor with charitable intent who no longer needs the coverage, this converts an unwanted obligation into a gift.
The tax treatment is specific and is a question for your own advisor rather than for this page or for the charity. In general terms, a deduction for a gift of a life insurance policy depends on the policy’s value and your basis, substantiation requirements apply, and gifts of property above stated thresholds require a qualified appraisal. Do not rely on a development officer’s summary of the rules.
Also confirm the charity will accept the policy. Many decline contracts that require ongoing premiums, and some have written gift acceptance policies that exclude life insurance entirely. Our comparison of a charitable gift versus a settlement covers the trade-offs.
Option Five: Transfer Within the Family
Sometimes an adult child who is already a beneficiary is willing to take over the premiums in exchange for ownership. That keeps the death benefit in the family and eliminates the household’s obligation, and it avoids the underwriting and diligence that an institutional transaction requires.
Two things to handle carefully. Transfers for value can affect the income tax exclusion that normally applies to life insurance death benefits, with exceptions that depend on who the transferee is — a question for your own tax advisor before anything is signed, not after. And family transactions have a way of generating conflict later among siblings who were not consulted, so document the arrangement in writing even when everyone is agreeable.
Our page on selling to a family member versus the open market covers both issues. A 1035 exchange is a different tool entirely and is worth understanding if the goal is to restructure rather than exit.
What a First Death Changes
Once one insured dies, the contract prices as a single-life policy on the survivor: one life expectancy, one mortality curve, and access to the full bidding market. Contracts that drew no interest while both spouses were living frequently become viable afterward, and the improvement is generally a multiple rather than a small percentage.
File the death certificate with the carrier promptly even though no benefit is payable. Survivorship designs commonly restructure charges at the first death, some contain a split provision, and some revise the required premium — none of it takes effect until the certificate is recorded, and a surviving spouse who waits can pay a year of premium at the wrong rate. See what changes after a first death.
Ask at the same time whether any guaranteed death benefit provision survives the first death unchanged, and what the required premium becomes.
Ownership, Contestability, and South Carolina
If an irrevocable trust owns the policy, the trustee executes any disposition, bounded by the trust instrument, and the insureds have no authority even as grantors. The trustee’s file needs the trust document with amendments, confirmation that disposition is authorized, any required beneficiary consents, a current in-force illustration, and evidence the policy was shopped rather than shown to one buyer.
Two two-year rules apply separately. The contestability provision lets the carrier rescind for material misrepresentation on the application for generally two years from issue, with a fresh period after reinstatement, and on a joint contract that right can attach to either insured’s answers. State settlement law separately restricts transferring a policy for a period after issue, commonly two years, with exceptions for terminal illness, chronic illness, divorce, retirement, or disability.
Colonial Life is supervised by the South Carolina Department of Insurance, and South Carolina addresses viatical settlements within Title 38 of its Code. South Carolina imposes neither an estate tax nor an inheritance tax, and the federal exclusion is $15 million per individual for 2026 under the 2025 tax legislation — but the settlement law governing your transaction is that of the owner’s state of residence, and roughly a dozen states still impose their own death taxes at far lower thresholds.
If you also hold single-life permanent coverage, evaluate it on its own terms — see Colonial Life whole life contracts. For a read on your own policy, send the cover page for a free review or call (305) 209-7183.
Frequently Asked Questions
Can worksite coverage bought at my job be sold?
It depends on whether you hold an individual portable policy or a certificate under an employer’s group plan. Individual permanent coverage may be assignable; a group certificate generally is not, because the employer or a trust holds the master policy. Supplemental health and disability products have no death benefit to transfer at all.
Why does the healthier spouse control the offer?
Because a second-to-die contract pays nothing until both insureds have died, the joint survival curve stays above zero while either one is living. Combining a short life expectancy with a long one produces a joint expectation close to the longer figure rather than an average of the two.
What is a retained death benefit arrangement?
The policy is transferred to a buyer who assumes all future premiums, and the original beneficiaries keep a guaranteed portion of the death benefit instead of the seller receiving cash. It suits a household that cannot sustain the premium, does not urgently need cash, and wants heirs to receive something rather than nothing.
Should I reduce the face amount instead of selling?
Often yes, if the exposure the policy was bought for shrank rather than disappeared. Lowering the face amount reduces cost-of-insurance charges and the required premium. Ask first what the reduction does to any no-lapse guarantee, whether a surrender charge applies, and whether the contract must be retested under the modified endowment rules.
Can I give the policy to my church or a charity?
You can transfer ownership to a qualified charity, but confirm the organization will accept a policy that requires ongoing premiums, since many decline. The deduction rules depend on the policy’s value and your basis, and substantiation requirements apply. Get that analysis from your own tax advisor rather than from the charity.
What is the effect of one insured dying?
The contract prices as a single-life policy on the survivor, with one life expectancy and the full bidding market available, so value typically improves by a multiple. File the death certificate with the carrier promptly, since contractual changes to charges and required premium do not take effect until it is recorded.
How small is too small to bother reviewing?
The secondary market generally will not bid below roughly $100,000 of death benefit, and on joint contracts the practical floor is higher because two sets of medical records and two life expectancy reports must be funded. Below that, the reduced paid-up figure and a face reduction are the options worth pricing.
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Related Reading
- Can I Sell A Survivorship Life Policy
- Life Settlement Vs Lowering The Death Benefit
- What Is Reduced Paid Up Insurance
- What Is A Retained Death Benefit
- Life Settlement Vs Charitable Gift Of Policy
- Life Settlement Vs Selling To A Family Member
- 1035 Exchange Vs Settlement
- Survivorship Policy First Death
- Sell My Colonial Life Whole Life Policy
Pine Lake Life Solutions does not purchase life insurance policies and does not provide legal, tax, or investment advice. Information provided is for educational purposes only. Eligibility for any option, including life settlements, is not guaranteed and depends on individual circumstances, policy terms, underwriting, and market conditions. Consult independent legal, tax, or financial professionals before making decisions regarding a life insurance policy.