Can I sell my life insurance policy for cash? This is the question you might ask if you have a life insurance policy that you no longer need or can’t afford. You may think that stopping payments for the policy or surrendering it are the only options that you’re left with. However, that’s not the case; there are other options as well, like selling your life insurance policy for cash.
"80% of the Life insurance policies having the face value of more than $100 billion are lapsed or are surrendered by the people every year in the US."
There are chances that you would have heard people selling their life insurance policies in exchange for cash. This might get you thinking that it’s an easy way to get cash from your life insurance policy whenever you want, which is not the case.
The truth is, selling life insurance policy is an alternative that can be taken in some situations where you don’t want your life insurance policy anymore. Even in those specific situations, you need to first understand how it works, what are the situations where you could sell your life insurance, and its consequences as well.
Before selling your life insurance policy, you need to make sure that you cannot continue to pay for the insurance or you no longer need the benefits that these insurances provide after you pass away. This is where it gets very tricky and you need to be absolutely sure about what you choose to do.
Once you’ve decided that you’re going to sell your life insurance policy, you need to know everything about it. Selling a life insurance policy basically is a process that involves selling your policy to another investor or entity. Once sold, the buyer becomes the owner of the policy, which means the buyer pays the premiums and then receives the benefits from the policy when you pass away.
This process is also referred to as a life insurance settlement or in some cases viatical settlement. Life insurance settlements allow you to receive more money than what you would get when you cancel or surrender your insurance policy for its cash value. On the other hand, life insurance settlement provides you less face value or death benefits.
In order to sell your life insurance policy, the most important thing is to find a suitable buyer. You can do it yourself or you can take the help of companies that buy existing life insurance policies. Also, you need to make sure that you have all the necessary documents, like the required insurance policy documents and your present medical records.
Basically, life insurance buyers tend to buy policies based on many factors, most importantly:
“Life insurances of people above 65 years or people who are terminally ill, fetch more buyers, because there are more chances of the buyer getting the returns early.”
There are only specific circumstances where you could consider selling your life insurance policy. Here are some of those:
If there’s a situation where the cost of your life insurance premium becomes unaffordable, you as the policy owner can sell your policy to prioritize the current financial situation. This will help you get the much needed money that could bring in financial stability for you and your family.
There are times when in spite of you being able to pay for the life insurance policy would want to sell your policy to use the money for other purposes. You can use the money you get to repay your old loans or you can use it for many other purposes as well.
The rapid increases in the cost of healthcare have put many seniors in a very vulnerable position financially. If you’re facing the same problem, you can sell your life insurance policy and use the cash for your healthcare and treatment. This is a valid reason to sell your policy.
”The cost of healthcare increases by almost 5% every year, which has been the major factor behind putting many seniors under vulnerable financial positions.”
Most of the life insurance policyholders tend to purchase the policies to provide financial support to their children in case something happens to them. However, when the children grow up and become financially independent , there’s no need to keep paying for the policy anymore . This is when you can decide to sell your life insurance policy.
Now that you know about the specific circumstances where you could consider selling your policy, there are a few things that you need to keep in mind. Here are some things that you need to know before selling your policy:
“Life settlements pay policy owners three to five times on average more than the cash surrender value”
Who will buy my life insurance policy? This is one of the most important questions that you might come across after deciding to sell your policy. There are certain companies that buy life insurance policies known as life settlement providers who specialize in buying these existing life insurance policies from the people. These institutions are mostly regulated by the state laws that make them the safest place where you can sell your policy.
You can also sell your policy yourself by finding a buyer for it or through a broker as well. However, this could be tricky as the buyers generally look for specific policies. Some look for small policies, while others prefer big policies. Finding the right kind of buyer for your policy might be a hectic job. This is why it’s recommended that you choose a life settlement provider to do the job for you.
“Brokers tend to collect almost 30% of cash gained from the life settlements as commission from the policy owners.”
As per studies, more than $1 billion worth of life insurance policies are sold in the US settlement market. This figure is a testament to the fact that the life settlements are safe for most people. Also, if you choose to sell your policy with the help of a big life settlement provider, like Harbor Life Settlements,which is one of the best companies that buy life insurance policies, then there are much fewer chances of any problems.
It might have become obvious to you that finding the right buyer for your policy is the most essential part of the whole life settlement process. This is why it’s recommended that instead of going out yourself to look for a potential buyer for your policy; you should opt for life settlement providers. The life settlement providers, like Harbor Life Settlements, have experience in finding the right buyers for your policy.
Also, there are chances that you might not know the worth of your policy, which happens in most cases. This is where the life settlement providers or the viatical settlement companies as they are known in some cases, can come to your rescue by providing the actual value for your policy.