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.
A Closer Look – What Else Do You Need to Know About Selling Your Life Insurance Policy? – Part Two
We’ve discussed many of the steps involved in selling your life insurance policy. Remember: the decision to sell your policy is yours. Some people decide that they want to know what their policy is worth, then they wait until later to consider selling. Every person’s situation is different.
You may still have a few questions. Here are some additional points to take into consideration.
Determine the Value of Your Policy
We have previously discussed getting a valuation for your life insurance policy. You will want to first get your life insurance policy appraised so you can know the value of it; this fact will help you navigate the rest of the process. Should you choose Harbor Life Settlements to help you determine your policy’s value, you’ll receive your answer faster than you would if you were to use another life settlement company.
Let’s look at a hypothetical scenario so you can know what to expect:
You decide you would like to know how much your life insurance policy is worth in cash. Harbor Life Settlements works with the insurance company to collect all necessary information to determine whether a policy type can qualify. If the policy type and premiums are eligible for a life settlement, Harbor Life then collects the necessary medical information to fully underwrite the policy. After the discovery and underwriting phases, Harbor Life will then send the case to our preferred licensed broker partner. They will present your policy to a large network of buyers to bring you the best price. The broker will then present you with the best cash offer.
Next, you can opt to continue with the sales process, should you wish to sell your policy for cash. Or you can do nothing. You can retain your policy, knowing what it’s worth now, and have that in mind, should you need the cash for the future. We recommend that everyone at least find out what their policy is worth in cash, should a person need to sell the policy at some future date. With the rising cost of long-term care and other expenses that can crop up during retirement, it’s good to know that you have a potential ‘go-to’ cash resource with your life insurance policy.
How to Sell a Term Life Policy Insurance for Cash
What if you own a term life insurance policy? Can you sell that for cash? It’s a good idea to talk to a life settlement company about your options. Harbor Life Settlements can examine your policy and let you know. In many cases a term life insurance policy can be converted, allowing you to sell it for cash, as you could with other policies. Even if you are not intending to sell your term life insurance policy right now, having the information can allow you to make decisions. You may want the cash for a future need; so discovering your policy’s cash value now can be helpful.
Enjoy Financial Flexibility
In addition to creating a will and handling other aspects of your affairs, selling your life insurance policy for cash can help you provide for your family’s needs. When you discover the cash value of your policy via a price check process with a life settlement company, you can do more than plan for the future – you can help your family right now, too. Consider this example:
Jenny owns a life insurance policy with a $2 million dollar death benefit. Harbor Life Settlements underwrote her policy to determine the value, and sent it to a licensed broker who presented it to a network of buyers. The broker was then able to make Jenny a cash offer, which in this example, is $1,200,000 (this is an example; your circumstances may cause the cash price to differ). Jenny decides to keep half the money to fund her long-term care needs. She then gifts the other half to her son, so he can put a down payment on a house.
Selling your life insurance policy for cash allows you to enjoy financial flexibility: you can provide for your own needs, and should you wish to, you can help family members now, versus having them wait to become beneficiaries of your policy, upon your death.
A Closer Look at Tax Implications
As with any financial decision, it’s important to check on the tax implications. Your particular situation will differ from that of other people, so providing examples here will not be applicable. A talk with an independent financial advisor can put your needs into focus, and help you decide if selling your life insurance policy is right for you. You can listen to what the advisor has to say about implications for your present situation, and how the sale of your policy might affect your future, as well. The decision to sell or to retain your policy can then be made when you have all the facts about how a cash settlement will impact your finances.
You may also wish to have a financial advisor review how selling your life insurance policy may affect your eligibility for programs like Medicaid.
While you are speaking with your financial advisor, you may wish to ask about how selling your life insurance policy might affect your eligibility for Medicaid, if you had plans to apply for that program. Your advisor can work out the details how a lump sum cash payment from a life settlement company may impact this, and eligibility for other programs. Some of these calculations/forecasts can be complex, and often are best reviewed by professionals. You may wish to determine how much you could get in cash for your life insurance policy, then consult with financial experts to have them advise you regarding your personal situation.
Gather the Information You Need for an Informed Decision
We’ve reviewed several key points regarding the potential sale of your life insurance policy. Some points apply more generally, and others may be best understood by consulting with a private financial counselor or advisor. In the end, you are the one who will determine the best course of action. Gathering information and discovering your options is the same kind of fact checking you would do for any decision. You can get multiple estimates if you wish, and weigh the pros and cons to see if selling your life insurance policy is the right choice for you.
Harbor Life Settlements is ready to help you discover the cash value of your life insurance policy. We can also guide you through the sale process, should you wish to sell. Get in touch with us today; (800) 694-0006! Find out how much your life insurance policy is worth in cash!