Are you considering selling your life insurance policy? This may be one of the hardest decisions you’ll ever have to make, but if it’s something you’re thinking about, consider the pros and cons of a life settlement process before making a final choice.
How Does This Work?
A life settlement occurs when you contact a provider and sell your unwanted or unneeded life insurance policy for less than the net death benefit value. While you won’t receive the full amount of your policy, you’ll be relieved of your commitment to the policy while also getting your hands on some quick cash.
If you’re selling your life insurance policy, you may be doing so because it has become too expensive. Other circumstances, including age or illness, may also be rendering the policy useless, so your money is no longer being put to good use.
There are many good reasons to sell your life insurance. Perhaps the biggest one is the fast cash you’ll receive. Instead of garnering your funds in monthly or annual installments, you’ll get access to all your money at once. A single transaction leads to one lump sum that you can use in any way you wish.
If you’re drowning in debt, or you need to cut down on expenses for any reason, selling your life insurance policy to the appropriate provider may be your best answer.
There are also tax benefits to cashing out on your policy early. If you’ve been paying for your plan for several years, you’ve already put much money into it. By cashing out, only the money that exceeds the total amount you’ve paid over the years is taxable, and even then, it is only taxed as regular income. You will not be required to pay capital gains tax on what you receive.
Another benefit? Early retirement. If you don’t feel you can work anymore, or if you’re ready to throw in the towel at your office job and you just want to live your life free from this point on, cashing out on your life insurance policy can help you do that. With the money you receive from the sale of your policy, you’ll be able to take care of bills and enjoy more of what life has to offer.
All of this sounds good, but it’s important to remember that, as with many decisions, there may be additional points to consider. Let’s look at a few reasons as to why you wouldn’t want to sell your life insurance policy.
You may outlive the policy sale proceeds you receive. It’s easy to think that a certain amount of money will last a set period, but this is not always the case. If you do live longer, the money you earn may run out sooner than you might expect. In that event, you may have to consider your options regarding a potential return to work or some other means of securing a viable income for yourself and your family.
Another con is that while a life settlement gets you cash now, it will leave nothing to your beneficiaries. Once the policy is sold and you garner the sum, your family is entitled to nothing, which means that unless you provide them with some of the funds from the settlement, they’ll have nothing once your life has ceased. This is something to consider if you wish to provide for them after death.
If you’re receiving Medicaid or some other form of government subsidy or income, it’s important to note that a life settlement could get in the way. To find out more, it’s necessary to research the laws of your state and see how any benefits you claim later in life might be affected. Additionally, credit card companies or anyone else you owe money to could claim your funds before you even have a chance to deposit them. Depending on your debt situation, a life settlement could disappear as quickly as it’s received.
Lastly, we discussed taxes during the pros section, and this is something to give a second thought to. If you don’t want to be paying taxes into your later years, a life settlement may be the wrong route to take.
Selling Your Life Insurance Policy? Let Us Help!
If you’ve looked at your situation and you think a life settlement is in your best interest, please contact us today. We are Harbor Life, and we work with several different providers throughout the country to ensure you get the best price for your life insurance policy with the least amount of hassle.
Visit our site and get your free estimate today, or give us a call to speak with one of our qualified reps. We provide each customer who calls equal time and consideration. We’ll also tailor our methods to best match your unique circumstances.
We look forward to hearing from you.