Saturday, August 13, 2022

Can You Sell Your Term Life Insurance Policy

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How Do I Find A Reputable Broker

How to Sell My Term Life Insurance Policy for Cash : Life Insurance & More

You can do some research online to find a good broker. If you consult an independent advisor, they can also give you some recommendations. Before you hire a broker, find a few that have good reviews and set up a short interview with each. Ask about their experience, their process and, most importantly, their fees.

Can I Sell My Life Insurance Policy For Cash

Can you really sell your life insurance policy for cash?

Yes, and before you cancel your life insurance policy, you should see if you can sell it. Selling your life insurance policy for cash will not only help you eliminate the cost of the policys premiums but will also give you access to a lump sum of money which you can use any way you choose.

For those who are age 65 and over and have a life insurance policy that is no longer wanted or needed or that is getting more difficult to afford there is a solution available that can not just help to lessen expenses, but that can also conceivably net a significant amount of cash in your pocket. These are known as life settlements.

Find A Reputable Broker

When trying to find the right broker, a good process is to interview not one but several. Ask questions like: What can you do to improve the offers I get? What is your commission structure? Is it negotiable? Are you licensed in your state? Are you willing to give discounts if I pay for medical expenses? Pay close attention to the transaction costs, because they can easily eat up your profits. Some experts indicate brokers can charge as much as 30% to 50% of the gross policy price, or as little as 5% to 15%.

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Accelerated Death Benefit Rider

If your policy has an accelerated death benefit rider, that could be a viable alternative to a settlement.

Accelerated death benefit riders allow a policyholder to receive cash advances against the death benefit of their life insurance. This reduces the final death benefit, but can help policyholders who are terminally ill collect cash to pay for treatments and other expenses. These riders may also be called a living benefit rider or a terminal illness benefit rider.

Borrow Against Your Policy

Can You Sell Your Term Life Insurance Policy : Whole Life Insurance ...

Borrowing against your policy is a short-term solution, which allows you access to loaned funds from your overall life insurance policy. Its important to understand that these funds must indeed be paid back over time. There is also interest that accrues on top of the loan amount that must be paid.

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How Long Does It Take To Sell A Life Insurance Policy

It will probably take at least a few months to sell your life insurance policy. However, the amount of time it takes depends on the number of offers you get and the quality of those offers. If you accept the first offer that comes in, it might only take a month. However, you might be waiting for several months to get a suitable offer, depending on the market.

Sell Your Life Insurance Policy Calculator

In the life insurance business, when a policy owner sells a policy its known as a life settlement. If youre reading this, maybe youre considering selling a policy you have. Were here to offer information and help you if we can.

First, know that not every policy can be sold. Whether you can sell yours will depend on a few circumstances, as well as the policy itself. The most important factors a potential buyer will consider are your health, the amount of your policy, and your life expectancy.

By using our quiz, you can find out if your policy qualifies as well as how much you might be able to sell it for.

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Why Buy A Term Life Insurance Policy

Term life insurance may be a good choice if your primary goal is to find an affordable way to cover the cost of your final expenses and the financial obligations you leave behind after you die. As the National Association of Insurance Commissioners points out, a term policy is often the best option for someone who is looking for the highest benefit amount for the lowest premium.

Since term life policies have nocash value apart from their death benefits, they also are best suited for those who have no interest in using their life insurance as an investment or estate planning tool. Lets say youre either single with no children, or your children are grown up, so you have no need to use a life insurance policy as a loan source to help pay for their college education. Youre not counting on life insurance to leave a large sum of money for your heirs to live on or to benefit your favorite charity. You simply want the peace of mind of knowing your loved ones will have enough money to cover some immediate financial needs after your death.

When Is Selling A Life Insurance Policy A Good Idea

Can I Sell My Life Insurance Policy?

Some people are better candidates for selling a life insurance policy than others. Having a universal life insurance policy or any policy with a face value over $250,000 makes your policy more attractive to settlement providers, and you are more likely to receive an acceptable offer. But whether your policy is attractive to buyers is not the only consideration.

Selling a life insurance policy may be a good option for individuals over 65 years old who are chronically or terminally ill. It may also be an acceptable option if your life circumstances have changed and you no longer have dependents who will need financial support after your death.

If you simply can no longer afford to pay your policy premiums, selling your life insurance policy is one of many options. Your best bet is to thoroughly examine your options with the help of an accountant, insurance agent, or financial advisor, and make sure it is the best option for you.

Remember, if you decide that selling a life insurance policy is a good idea for you, the influx of cash you will receive is only a fraction of the face value of the policy and the amount that your beneficiaries would receive upon your death.

According to the U.S. Government Accountability Office, payouts for life insurance settlements are often as low as 13% to 21% of the face value of the policy.

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What To Do If Your Policy Is Expiring

You will have the most options if your policy is still in force and hasnt reached the end of its term. Ideally, its best to make plans at least a year before that point. Here are some steps to consider.

The COVID-19 pandemic reportedly caused many insurers to reevaluate their life insurance products for older people, who are more vulnerable to dying from the disease. Until the pandemic ends, you may have fewer options or encounter higher prices than you would otherwise.

Convertible Term Life Insurance

You can sell a term life insurance policy for cash, but your policy will usually have much more value on the market if it is the type that can be converted to a whole or universal life policy. The provision in a term life policy that allows for this change is called a conversion rider. It typically will enforce a time limit for making the conversion generally before your term policy expires along with an age limit of 65 to 70 years.

If you purchase a convertible policy, you can exercise your option to convert without the requirement of an additional medical exam to determine your health condition. The face value of your policy will typically stay the same when its switched, but your premiums will go up in light of the cash-building benefit of the new permanent policy.

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Who Might Buy Your Life Insurance Policy

Brokers such as Ovid Life Settlements, Welcome Funds and Life Insurance Settlements shop around to find the best price for consumers. Life settlement providers like Coventry Life Settlements and GWG Life Settlements, buy the policies themselves.

The life settlement purchaser buys the policy from you, continues making the payments and receives the eventual death benefits. You get an amount of money somewhere between the current cash value and the death benefit, after paying a fee, which could be as much as 30 percent of your life settlement, according to the Financial Industry Regulatory Authority.

The average life settlement payout is around 20 percent of a policys death benefit, sometimes up to 30 percent. So, a $1 million policy might provide a settlement officer of $200,000 in cash.

But life settlement brokers and providers arent interested in just any cash value policy. Interest usually starts at policies with $100,000 or more in cash value owned by people who are 70 or older, said Peter Colis, CEO and co-founder of the term life insurance company Ethos. Some brokers and providers buy policies from people who are 65 and up.

The reason they want older policyholders is, sadly, morbid: The companies are looking for the quickest payout they can get, and the older you are the sooner you will die, actuarially speaking. The older you are, the more a life settlement company will pay for your policy.

Situations Change Over Time

Sell Life Insurance Policy for Cash

Your current situation is likely different than when you initially purchased your life insurance policy. All too often, a policy holder reassesses their financial situation and, once the kids are grown and the mortgage is paid off, the impending premium increases just dont make sense any more. If you ask the insurance company what you can do, at best, they may offer to sell you a smaller term policy if you are in good health and still insurable.

Make sure that you consider your options before letting your policy lapse. If you have a term life insurance policy that is no longer needed, wanted, or is nearing the conversion date, it may be a good idea to contact a life settlement provider or broker, licensed in your state, to evaluate your policy before you make a decision to let the policy lapse.

Too many term life insurance owners assume that since there is no cash surrender value that the policy would not have value in a life settlement, but many term policies still work for a life settlement. Another option to explore if your health conditions are poor, particularly if you have a chronic or terminal illness, is whether your policy has an accelerated death benefit rider. If it does, you may be able to get some or all of your policys face value paid out before you pass.

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How To Sell A Term Life Insurance Policy

Who buys life insurance policies? It may be possible to sell a term life insurance policy, but you would have to be the right candidate. Someone who could possibly be the right candidate would be someone who may be facing serious health challenges or someone that has been diagnosed with a terminal illness, they have an inforce term life insurance policy and it must have a conversion option available.

The reason you would need a conversion option available if youre trying to sell a term life insurance policy is so the life settlement provider who buys the policy can make sure the policy does not lapse leaving it worthless to someone who buys life insurance policies.

Term Vs Permanent Life Insurance

Term life insurance is a life insurance policy that you can buy for a specific set of years, often 10, 20, or 30 years. After that time period, the policy could expire or renew at a much higher price. Permanent insurance, on the other hand, is coverage that usually stays in place for your entire life as long as you pay premiums.

One major difference is that term insurance tends to be more affordable, while permanent insurance premiums are usually higher. However, permanent life insurance policies are guaranteed to have a payout as long as your policy remains in force. Your term insurance may expire before you ever use it, but permanent insurance stays in force as long as you pay premiums, unless otherwise stated in your policy. Most permanent policies also feature a cash value component, which is money that you can access from your policy while youre living.

Term life insurance can be beneficial for getting relatively inexpensive coverage to bridge certain gaps and protect specific milestones of your life. Permanent life insurance, on the other hand, works for long-term coverage, as well as building some liquidity through the policys cash value component.

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When Should You Cancel Life Insurance

Thinking about canceling your life insurance policy? There are a few things you should consider first before you start the process.

For example, when you cancel your policy, you can never get it back. To get life insurance again in the future, you would have to go through the initial application process. Plus, as you get older, life insurance premiums typically get more expensive.

However, there are valid reasons why you might decide you no longer need a life insurance policy. Here are some of the situations in which it might make sense to drop life insurance coverage:

  • You no longer have financial dependents: If your children have become adults, or you are divorced, you might decide that you no longer need life insurance to cover your dependents.
  • You want to buy a new policy: If you want to purchase a different type of life insurance, or if youâre unhappy with your provider, you can cancel your current policy and find something that works better for you.
  • You canât afford the premiums: If youâre struggling to afford your life insurance premium, itâs ok to cancel. However, if you still have financial dependents, think about putting some of the money you were paying into a savings or retirement account for peace of mind.

Reasons For Selling A Life Insurance Policy

Secrets on How to Sell your Life Insurance Policy

People consider selling their life insurance policies for a variety of reasons. Here are a few situations in which you might be thinking about it as an option:

  • You need cash for retirement.
  • Your premiums are no longer affordable.
  • You need funds for long-term care.
  • You need financial help to pay for your medical bills.
  • You sold a family business, or the owner retired and the insurance is no longer needed.
  • You are overinsured.
  • You no longer have beneficiaries.
  • The term of your policy is expiring.

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Potential Downsides Of Multiple Life Insurance Policies

If you begin to amass a large amount of policies, you may be taking on a significant cost because each policy would have its own premiums to be paid.

Another reason you may not want to have multiple policies is due to overinsurance. Some companies may limit the amount of insurance you can purchase depending on your income and needs. They will also take into account existing or pending policies with other companies.

Can You Sell Your Life Insurance Policy

Yes, you can sell your life insurance policy by obtaining a life settlement. The process of obtaining a life settlement involves selling a life insurance policy to a third-party buyer for a cash payout that is more than the policys cash surrender value but less than the total face value of the policy.

Another type of settlement that follows a very similar process is known as a viatical settlement. While similar to a life settlement, a viatical settlement is the process of selling a life insurance policy to a third-party buyer where the insured has a chronic or terminal illness.

While the viatical settlement process is mostly the same as a life settlement, the tax implications and state regulations differ drastically.

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Selling Your Term Life Insurance Policy

If you have a convertible term life insurance policy and need cash to supplement your retirement income, pay medical bills, or pay for long-term care costs, you should consider converting your term life insurance policy and engaging in a life settlement.

Always consult with your insurance agent or trusted adviser in handling these important matters.

Getting rid of a term life policy you no longer need is a delicate matter, and as the policy owner, you should be aware of all the options that exist at your disposal.

Want to learn more about life settlements? Check out our page on selling your life insurance policy.

Get an estimate of your policy value in seconds.

How Long Does Your Life Insurance Policy Have To Be Inforce Before Pursuing A Life Settlement

Can You Sell Your Term Life Insurance Policy : Whole Life Insurance ...

It is common practice that a life insurance policy must be inforce or opened and active for 25 months at minimum in order to qualify for a life settlement. However, this requirement differs from state to state. For example, some states require your life insurance policy to be open for five years before it is eligible for sale. If you are unsure of the rules and regulations associated with life settlement policies in your state a life settlement advisor can help educate you on this information.

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Term Life Insurance Settlement

If a policy with no cash surrender value is sold , the policy premiums would have largely covered just the cost of insurance, so that the proceeds received from the sale of the policy would all be capital gains.

Convertible Term Life Insurance

This suggests that convertible term life insurance may be the most tax advantageous type of life insurance policy for life settlements.

It also suggests that when the redemption price of life insurance nears the life settlement value of a policy, careful consideration needs to be given to determine whether the additional tax burden of selling on the life settlement market justifies the transaction.

Article written in part by:

Eric S. Ratliff, JD, LLMRatliff Law Firm

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