Does a Term Life Insurance Policy Have Cash Value?

Did you know you can sell all or a portion of a life insurance policy, even term insurance?

(3-minute read)

Does term life insurance have a cash value? If you have a convertible term life policy, the answer is yes! Selling a life insurance policy is possible even for term insurance. In this quick blog, we’re explaining how the transaction works and sharing how to use a cash value life insurance calculator to get an estimate of what you could gain. 

How Does Term Life Insurance Work?

Holders of a term life insurance policy pay the insurance premiums for a temporary length of time. This can be anywhere from 10 to 30 years. If the holder passes away during the time they are paying these premiums, the benefit of the policy is paid to whoever is the named beneficiary on the policy.

There are two types of term insurance, level term and decreasing term.

  • In a level term policy, the death benefit is the same throughout the life of the policy, whether a claim is made in the first month or the last one. Level term policies are the more common type of term life insurance. 
  • In a decreasing term policy, the death benefit decreases every year, and the premiums might as well. This type of insurance is often used to cover temporary obligations like a loan or mortgage. The benefit decreases as the loan is paid back while beneficiaries are covered in case of the unexpected. 

What Happens to Term Life Insurance at the End of the Term?

After the term of a life insurance policy ends, the coverage expires and the policy holder no longer has life insurance. That means there is no return on the premiums you have invested! Many people think this is just part of the way insurance works. 

If the term on your policy is approaching, you might wonder “what is the cash surrender value of a term life insurance policy?” Surrendering the policy means selling it back to the life insurance company in exchange for a return of some of your premiums. With a term life policy, this is not an option. A term life policy has no cash surrender value. But that doesn’t mean you can’t get cash–it just means you can’t get it from the insurance company. 

Many term policies come with the option to convert the policy into a whole or universal life policy. These are permanent life insurance policies which never lapse as long as the premiums are paid. If you do not want to maintain the policy any longer, you can sell the convertible term insurance in a life settlement to an investor. 

What Happens When You Cash In a Life Insurance Policy Through a Life Settlement?

When you cash in a term life insurance policy through a life settlement, independent underwriters and insurance experts review the details of your policy. You will learn if there is a fee to convert your term policy into a whole or universal life insurance policy. Your medical records will also be reviewed to learn if your policy is an ideal fit for the life settlement  market. The best candidates for a life settlement are those over 70 years of age who have experienced a change in health since the policy was issued. However, every transaction is unique and you may qualify to sell your term insurance even if you do not meet these criteria. 

Once you qualify and agree to sell the policy, you will receive a closing packet for completion , then receive your cash! The investor pays the insurance premiums and maintains the policy, receiving some or all of the benefit when you pass away. If you only sell a portion of the policy, your heirs will also still receive some of the benefits, even though the investor has been paying the full premiums!

Trust Life Settlement Advisors to Sell Your Term Life Policy

If you are ready to see if you qualify to sell a term life insurance policy, our calculator will let you know if this opportunity is right for you. You only share a few pieces of information to gain insight that could be life changing. Use our life settlement calculator to see if you qualify! 

Did you know you can sell all or a portion of a life insurance policy, even term insurance? Selling an unwanted life insurance policy is no different than selling your car, home, or any other valuable asset that will create immediate cash. Contact us today to learn more.

I am always happy to answer any questions about these life-transforming transactions.

Leo LaGrotte
Life Settlement Advisors
llagrotte@lsa-llc.com
1-888-849-0887

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