Many people wonder, can you sell your life insurance policy? You might decide to sell your life insurance policy for a variety of reasons. You might have a better deal or just need the cash. No matter what your motivation, you can sell life insurance policies for cash using a process called a “life settlement”. There are some things you should know before you decide to sell your life insurance policy.
How to sell your life insurance
Selling your life insurance policy is the first step. You need to decide if this is the best course of action. There is no way to get your policy back once you have sold it. You will need to contact a life settlement firm if you decide to sell. These companies buy life insurance policies. Here’s a step-by-step guide on how to sell life insurance policies.
Have your policy evaluated
First, have your policy valued. This can be done by a third party, or by the life settlement company of your choice. This documentation will make the rest of this process much easier.
Compare life settlement companies
Now that you have a good idea of the value of your policy, it’s time to look at other companies. You can research a number of life settlement companies, and compare their ratings with the Better Business Bureau and other independent rating agencies. Companies with high financial ratings and few customer complaints are the best.
Get in touch with life settlement companies
Once you have chosen your company, you can contact an agent by phone or email and tell them you wish to sell your life insurance policy. They will need to verify your identity and provide you with documents. They will also need to speak with the agent that holds your policy. You can then relax and wait for the sale to be completed.
Sign and Collect
The life settlement company will sell your policy and mail you a check. You will need to sign the paperwork in order to close the deal. Once you have signed the paperwork, you can say goodbye to your life insurance policy and deposit the check.
Selling your life insurance policy: The pros and cons
Selling your life insurance policy can have ups and downs depending on your circumstances. You will still have your life insurance policy but you will have cash. It becomes more contextual. Below is a table that lists the main pros and cons to selling your life insurance policy.
What is the best way to sell your life insurance?
In general, if you sell your policy, you can expect to get roughly four to eight times more than the cash surrender value of the same plan. There are no predetermined prices for life settlement exchanges. Your policy’s value will be determined by the price potential investors are willing to pay and your willingness to accept that price.
There are several factors that will affect the value of your policy and what investors will pay. These factors include the insured’s age, the amount of premium paid, the expected premium payments, and the payout. The older the insured, the more premiums that have been paid, and the larger the payout, the more you can expect to make from selling your life insurance policy.
Who should sell their life insurance policies?
Your circumstances will determine whether or not you should sell your life insurance policy. People who are no longer in need of their insurance policy or who feel the burden of maintaining it is too much to bear should consider selling.
If your beneficiaries are financially stable, you might not need your policy anymore. A better offer on life insurance is another option, but this can be tricky. Selling your existing policy will give you cash and free you from the responsibility of managing it.
If your income falls and the premiums start rising, life insurance policies can become a burden. Even with fixed rates, income loss or other expenses could make life insurance policies more expensive. Selling your life insurance policy is a good idea if you are unable to pay it. The sale will bring in some extra cash and eliminate a recurring expense.
What other options are there for selling life insurance policies?
Most people will find a better and less complicated financial solution by canceling their current life insurance policy, adding riders to their policy, or finding ways to lower their premiums.
- Ask for a lower coverage amount. Not all providers offer this option. However, reducing your coverage can help you lower your premiums.
- Cancel your policy: With term life insurance, your policy ideally expires when you no longer need it. You can cancel your policy if it has not expired.
- You can surrender your policy. Whole-life insurance owners might be able to surrender coverage and get some of the cash value back, but this could incur fees.
- Use your cash value: Some permanent life insurance allows you to pay premiums with your accumulated cash value amount if you can’t afford your premiums out-of-pocket.
- 1035 Exchange: A 1035 exchange is a way to trade for a lower-cost whole life or annuity if you are unable to afford your cash value insurance.
- Living benefits riders: Those who need cash for end-of-life medical expenses can access some of their life insurance funds with accelerated benefits riders if they have a qualifying illness.
You might be able reverse the sale of your life insurance policy if you are feeling remorseful. Life settlement brokers are required by some states to return your life policy to them if the settlement is not refunded within a certain period. Check with your state insurance department for details.
Selling a life insurance policy is it worth it?
Selling your life insurance policy is not a good investment. In fact, you could end up paying more for it than it is worth.
To access cash in retirement, it’s better to use traditional investment vehicles that have a higher return rate. Talk to an agent if you are unable to pay for your policy. They can discuss ways to modify your coverage to make it more affordable.
If you are unsure if selling life insurance is right for you, speak to a financial advisor.
Takeaway
- Selling your life insurance policy is an option.
- A life insurance policy can be sold for anywhere from four to eight times its cash surrender value.
- If they don’t need or can afford their plan, it is worth considering selling it.
- To facilitate the sale and purchase of life insurance policies, life settlement companies are available.
Make sure you are satisfied with the life insurance policy you have before you decide to sell it. You lose all rights to the policy once you have sold it. If the premiums are putting your financial security at risk or if you have changed so much that you no longer require the policy, then selling it is a good idea. You might want to keep the policy if you are in one of these situations.