Are you retired, or close to retirement, and struggling for money? If you have a life insurance policy, did you know that you can actually access its cash value by selling it? Many people don’t realise that their policy is an investment that third parties are potentially interested in. Whilst choosing to sell life insurance policy might be a big decision, the process is relatively simple.
Why Decide to Sell Life Insurance Policy?
Most people choose to sell their life insurance policy for the following main reasons:
- Sudden medical expenses
- No need for death benefit payout
- Need money for retirement
Sudden medical expenses
Sadly, as we get older, we sometimes succumb to health issues. One way to get a lump sum relatively quickly, that’s mainly tax-free, is to sell your life insurance. Having said that, it’s worth first checking with your life insurance company because some policies offer extra benefits such as long-term care.
No need for death benefit payout
Family and life situations change so you might realise that you no longer need a death benefit. This could be simply because your family is now independent. For example, the mortgage and school fees could now have been paid. This is clearly a very personal decision though and only you will know if you are ready to give up on your death benefit payout by selling your policy.
Need money for retirement
Let’s not forget that life is about enjoying the moment. Cash flow during retirement isn’t easy and sometimes we need that extra lump sum. If, on top of that, you feel that you no longer need a death benefit payout for your family, then why not sell your life insurance policy for cash?
Do you Qualify for a Life Settlement?
Before you get too far down the process, it’s worth verifying that you can actually sell your life insurance policy. Although, the qualifying criteria are easy to understand:
- Are you above 70 years old?
- Can you do a viatical settlement?
- Is your policy’s value at least $200,000?
Are you above 70 years old?
When investors buy a life settlement, they want to know that they’re going to get your death benefit payout relatively quickly. With the average life expectancy at just under 73 years old, according to MedicineNet, your life settlement buyers theoretically won’t have to wait too long.
Can you do a viatical settlement?
It’s worth noting that if you’re younger than 70 but older than 60 and facing a terminal illness, you can do a viatical life settlement. This is basically the same process as life settlements. Nevertheless, investors appreciate that your terminal illness reduces their risk of receiving your death benefit payout too far into the future.
Is your policy’s value at least $200,000?
Again, it’s all about what the investors are willing to buy. They’re clearly going to take into consideration your policy’s value when you do a life settlement and sell universal life insurance.
It’s also important to note that you can’t actually sell a term life insurance policy. If you have one of those then you’ll need to talk to your life insurance company to convert it to permanent life insurance. Basically, these have more value and are more interesting to potential life settlement companies. That’s because of the cash value you build up over time thanks to your premium payments.
Process to Sell Life insurance Policy
As mentioned, once you’re ready to go ahead and sell your life insurance policy, the process is pretty straightforward. You can expect the main points listed below:
- Verify that your qualify for life settlement
- Get together your paperwork
- Life settlement companies versus a broker
- Choose and offer and get your Closing Package
- Sign and get your lump sum
Verify that your qualify for life settlement
As mentioned, make sure that you can actually do a life settlement or a viatical before you do anything. After that, you’ll still need to put together your medical records for your potential buyer so that they can reassure themselves before selling a life insurance policy.
Get together your paperwork
Naturally, you’ll need to collate your policy papers for any life settlement company or broker. To give you an idea, they tend to look at policy type and size as well as the amount of your premium payments. From there, they can work out how those premiums impact your future death benefit payout and therefore how much they’re willing to invest in your life insurance policy.
Life settlement companies versus a broker
One question you’ll need to think about when selling your life insurance is whether you want to work directly with life settlement companies or through a broker. Whilst you can find life settlement companies locally, don’t forget that a broker’s main advantage is to bring you better deals. They can leverage their network to potentially offer you a great cash payout. They’ll also be able to guide you through the life settlement process.
Choose an offer and get your Closing Package
Now comes the easy part of selling life insurance policies. Once you have a few offers on the table for your life insurance policy, you can choose whichever one is essentially the highest. After you’ve confirmed, you’ll get your closing package for the final step to sell life insurance policy. Of course, you’ll have to reassure yourself that the final offer is greater than any long term care or other benefits that your insurance provides you with.
Sign and get your lump sum
After you sign your closing package, there’s a transfer of ownership when selling a life insurance policy. You’ll also get a lump sum into your bank account at the same time.
Key Takeaways when Deciding to Sell Life Insurance Policy
When asking the question, can I sell my life insurance then the easy answer is yes? First, you have to decide if you’re willing to give up your death benefit payout. Most people do this because they’re facing medical expenses they weren’t expecting. Essentially, doing a life settlement is a great way to get the maximum amount of money from your policy with a limited tax liability.