Most people take out a life insurance policy to provide death benefits for their families and loved ones after they’re gone.
It helps take away the worry about what’s going to happen to them financially. Although, life circumstances sometimes change and might lead you to consider to sell your life insurance policy.
Reasons to Consider to Sell Life Insurance Policy
There are a few different situations that might drive you to consider selling your life insurance policy, as listed below:
- You’re facing chronic illness
- Require long-term care
- To fund your retirement
- No longer need life insurance
You’re Facing Chronic Illness
This is a tough situation to face and usually needs some form of funding for hospital and medical bills.
Rather than taking out a new loan, you can either borrow against permanent life insurance or consider selling your policy, otherwise known as life settlements.
This has the added advantage of no longer having to deal with the premium payments. You’ll also get lower interest rates and a more flexible payment plan than more normal loans.
It’s worth noting that this only works for a universal life insurance policy but most term life insurance policies can be easily switched.
Require Long-term Care
Some people find themselves suddenly needing specialist long-term care especially if they lose mobility.
If on top of that, you also find yourself without such a strong need for death benefits because your family situation has changed then selling your life insurance could be an option.
To Fund Your Retirement
If you have a whole life insurance policy then you can use the cash value to increase your retirement income.
You’ll have to first convert your term life insurance policy into a permanent one if that’s what you have before you can sell your life insurance policy.
Either way, you have options to raise some personal funds.
No Longer Need Life Insurance
As mentioned, family circumstances change either because you’ve drifted apart or some have sadly already passed on.
Now the need for death benefits becomes less critical when compared to your own personal needs today, such as surviving retirement.
How Much to Expect to Get When You Sell Life Insurance Policy
Of course, you should first talk to your insurer to weigh up the options including getting a loan on your cash value.
Either way, if you’ve decided to sell an insurance policy then here are some of the highlights:
- 10% to 35% of the payout expected when you die
- Some factors to consider
- Required to be 70 years or older
It’s important to check the requirements when it comes to age and in some cases, you can actually be 65 years old.
It really depends on the type of insurance you hold as well as your insurer. Another good rule of thumb is to have a policy that’s at least two years old.
Then again, an older policy will be worth more with a higher cash value so you’ll get a larger payout.
Other factors to consider are the cost and remaining time of your premium payments. All this basically feeds into the cash surrender value of your policy.
In order to get a life settlement, you’ll need to make sure the seller gets more than that but less than the death benefit value of your life insurance policy.
How to Sell Life Insurance Policy
Everyone clearly has a different set of circumstances to deal with which is why it’s important to speak to any of the following people:
- Professional advisor
- Life Settlement broker
- Life settlement provider
They’ll be able to advise you on the specific payout to expect as well as connect you with the right life settlement company.
Then it’s simply a question of getting your paperwork and specific information together. The first key thing you’ll have to confirm is whether you have term life insurance.
Then, you’ll need to know if you can convert it to a universal life or whole life permanent policy.
That’s the only way you’ll be able to sell it because a term life policy doesn’t have a cash value associated with it.
Afterwards, your broker or provider will ask for your medical history, current health information as well as the status of your premium payments.
From that, they’ll calculate your potential price based on today’s cash surrender value.
It’s worth pointing out that you can always investigate your potential life settlement details without necessarily going ahead.
Final Thoughts on When to Sell Life Insurance Policy
Anything to do with money and life are big decisions. Therefore, don’t hesitate investigating your particular details with your insurer and life settlement professional.
Regardless, selling your policy might be a good option for you if. This is especially true if your family circumstances have changed and if you find yourself in financial need.
After all, that’s what a life insurance policy is for. It’s about supporting you during your lifetime and your family afterwards, as and when relevant.
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