Selling Your Life Insurance Policy Can Give You Cash
“Can I sell my life insurance policy for cash?” This is a common question that policyholders ask when they no longer need a life insurance policy. Are you thinking of stopping payments for the policy or surrendering it? Why do that when you have the option of selling your life insurance policy for cash!
“80% of the Life insurance policies with a face value of more than $100 billion are lapsed or are surrendered by policyholders every year in the US.”
You may have heard people selling their life insurance policies to life settlement companies or individuals in exchange for cash. This doesn’t mean that a life insurance holder can sell a life insurance policy for cash anytime he or she wants.
The truth is, selling a life insurance policy for cash is an option that can be taken when you don’t want the benefits of your life insurance policy anymore. Even in those specific situations, you need to first understand how the life settlement process works, under which circumstances you can sell your life insurance, and its consequences as well.
Before deciding to sell your life insurance policy, you have to be sure that you no longer wish to pay for the insurance and you don’t need the death benefits that the insurance provides. This is where it gets very tricky; you need to compare profit and loss before deciding to sell your life insurance policy.
What Does Selling Your Life Insurance Policy for Cash Mean?
Once you’ve decided to sell your life insurance policy for cash, you need to know everything about it. Selling a life insurance policy involves finding an investor or a life insurance settlement company to buy your policy. 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 thereafter.
The process through which a policyholder sells the insurance is commonly known as a life insurance settlement, or in some cases viatical settlement. Life insurance settlements offer more money than what you would otherwise get when you cancel or surrender the insurance policy for its cash value. That said, a life insurance settlement provides you with less face value and offers no death benefits for your heirs.
What is the Process of Selling Your Life Insurance?
The most important step towards selling your life insurance policy is to find a suitable buyer. You can do it yourself, or you can take the help of a life insurance settlement company that buys existing life insurance policies. Also, you need to ensure that you have all the necessary documents required, such as the insurance policy documents and your present medical records.
Life insurance buyers tend to buy policies based on various factors, most importantly:
A recap of these factors:
- The Seller’s age and health.
- The type of life insurance policy.
- The total cash surrender value or the accumulated cash value of the policy.
- The cost of the life insurance premiums
“Life insurance policies of people over 65, or people who are terminally ill, fetch more buyers because there are more chances of the buyer getting the returns early.”
Reasons to Sell Your Life Insurance Policy
There are specific circumstances where you should consider selling your life insurance policy. Here are some of those:
- Unaffordable premium costs
If you are going through a situation where the cost of the life insurance premium becomes unaffordable, you as the policy owner can sell your policy to overcome the current financial dilemma. This will help you get the much-needed money that could provide financial stability for you and your family.
- Better use of the funds
There are times when in spite of your ability to pay for the life insurance policy you may want to sell it for other purposes. You can use the money received from selling life insurance to repay your old loans or for other immediate needs.
- Meet healthcare costs
The rapid increase in the cost of healthcare has put many seniors in need of financial assistance. If you’re a senior citizen facing the same problem, you can avail the option of life settlement and use the cash for your healthcare and treatment. This is a valid reason to sell your policy for cash.
“The cost of healthcare is increasing by almost 5% every year, which has been the major factor behind putting many seniors in vulnerable financial positions.”
When you no longer need life insurance
A majority of life insurance policyholders purchase policies as a backup solution to provide financial support to their children in case of any adversities in the future. However, when the children grow up and become financially independent, there’s no need to keep paying for the policy. This is when you can decide to sell your life insurance policy for cash.
Things That You Need to Know Before Selling Your Policy
Now that you know about the specific circumstances where you can sell your policy in return for cash, there are a few things that you need to keep in mind:
- Your life insurance policy might not have the same value in the market that you’ve expected it to. There are chances that your policy might not be worth anything in the market as well. This is why you need to be prepared for the consequences.
- You’ll not get the complete face value for your policy. There have been various studies by the U.S. Government Accountability Office that suggests that most people only receive about 13%-23% of the total value of their policy after selling them, which is still better than getting nothing.
- There may be tax complications related to the selling of the policy. You might be subjected to pay a certain amount as a part of income tax.
- There are also chances that your eligibility for a government assistance program (such as Medicaid) might change if you decide to sell your life insurance policy.
“Life settlements pay policy owners three to five times on average more than the cash surrender value”
What is the Difference Between Viatical Settlements and Life Settlements?
Viatical settlements are different from life settlements. Many people tend to think both are the same. Well, the only thing that’s similar in viatical settlements and life settlements are that both settlements are about selling your life insurance. However, the major difference between these is, viatical settlements can only be done if the policyholder is terminally ill and has a life expectancy of fewer than two years.
Who Will Buy Your Life Insurance Policy?
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. Certain licensed firms buy life insurance policies known as life settlement companies. A life settlement company specializes in buying existing life insurance policies from the people who have decided to sell policies for cash. Life settlement companies are mostly regulated by state laws that make them a safe and legal place where you can sell and buy life settlements.
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 buyer for your policy might be a tough and time-consuming task. This is why it’s recommended that you choose life settlements investors to do the job for you.
“Life insurance settlement brokers tend to collect almost 30% of cash gained as commission from the policy owners.”
Is It Safe to Sell Life Insurance for Cash?
As per studies, more than one billion worth of life insurance policies are sold in the US through life settlement business. This figure is a testament to the fact that the life settlements in America are safe for most people. Also, if you choose to sell your policy with the help of Harbor Life Settlements, one of the top life settlement companies that buy life insurance policies, then there are fewer chances of you getting into trouble.
How to Find the Right Buyer for Your Life Insurance Policy
It might have become evident to you that finding the right buyer for your policy is an essential part of the whole life settlement process. This is why it’s recommended that instead of you searching for a buyer for the insurance policy; opt for good life settlement providers. Life settlement companies, like Harbor Life Settlements, have experience in finding the right buyers for your policy.
Also, you can benefit by discovering the value of your policy, even if you don’t decide to sell. Life settlement providers and viatical settlement companies can assist you in assessing the value of the insurance policy and provide you with the actual worth for your policy.