Did you know you can sell all or a portion of a life insurance policy, even term insurance?
(10-minute read)
Selling a life insurance policy in a life settlement can get you anywhere from 10 to 25% of the death benefit, in cash, while you are still living. But who qualifies for a life settlement? Are there any risks? We’re here to explain how it would work if you sell your life insurance policy, including how to use our life settlement calculator to see if you qualify.
How Much Money Do You Get When You Sell Your Life Insurance Policy?
The average face value of a life insurance policy in the United States is between $150,000 and $180,000. That means when the policyholder passes away, their beneficiaries typically receive $150,000 or a little more.
But would it surprise you to learn that most life insurance policies never payout? It’s estimated that as many as 90% of life insurance policies are allowed to lapse by the holders before the time of their death. Policyholders invest in these policies for years, but when the benefit is not maintained, all the money spent on the premiums ends up being a loss.
But don’t worry, there is a better way. Even if you no longer want to pay for the life insurance policy, you can still gain a significant return on your years of investment. The answer might be to sell your life insurance policy for cash—in a life settlement.
How Can You Find Out How Much a Life Insurance Policy is Worth in a Life Settlement?
Insurance policies are usually worth a lot more in a life settlement than they are in an insurance surrender. At the low end of a life settlement, you can expect to receive around 10% of the policy’s face value. That means for the $150,000 average policy we mentioned earlier, you would receive around $15,000 in a lump sum of cash after a life settlement. By surrendering the policy back to the insurance company, you usually only get around $460 for every $100,000 in policy value. That means for the same $150,000 policy, the insurance company would only pay you around $500.
It is definitely worth determining whether you qualify for a life settlement before agreeing to surrender your policy to the insurer!
What Happens in a Life Settlement? Why Do You Get So Much More Money Than A Life Insurance Surrender?
What is the life settlement industry? A life settlement gets you so much more money because your life insurance policy is being purchased by an investor. They will continue to pay the premiums on your policy and collect the benefit in the event of your passing. Forty-three states and Puerto Rico all have regulations in place to protect your privacy after the transaction takes place, though some have adopted more laws than others. Evaluating companies that buy life insurance policies is always a good idea–you deserve the protection and confidence that come from working with the best life settlement companies like Life Settlement Advisors!
It’s important to note, you also have the option to sell only a portion of your policy in a life settlement! If you have a $500,000 life insurance policy, you can sell half in a life settlement to get a nice sum while also maintaining some coverage for your beneficiaries and estate.
How Much Is My Life Insurance Policy Worth in a Life Settlement?
There are several factors that determine how much your life insurance policy is worth, including the following:
- Age: Under average circumstances, a policyholder must be 65 years of age or older to qualify for a life settlement. Sometimes younger individuals may be able to qualify for a viatical settlement based on other circumstances.
- Life Expectancy: Policyholders with a life expectancy of 15 years or less are the best candidates for a life settlement. If there has been a change in your health since you took out the policy, this can also set you up for a more lucrative payout.
- Type of Insurance: All types of life insurance can be sold in a life settlement, even term insurance. But, some types of policies may be more attractive for specific investors.
- Value of Insurance: The higher the face value of the insurance policy, the more attractive it becomes as an investment. At a minimum, the policy must be worth $100,000.
- Cost of Monthly Premium: Lower monthly premiums make a policy more attractive to investors, though they may also be willing to pay higher premiums for a greater benefit.
Ultimately, no two life settlement transactions are alike! But for those who qualify, the outcomes are reduced monthly expenses, a lump sum of cash, and a sense of payoff from your investment.
What Is the Downside of Selling Your Life Insurance Policy?
There are really only two downsides to selling a life insurance policy: losing the death benefit and potentially affecting Medicaid eligibility. While the latter is not always the case, forgoing the death benefit is something every policyholder must consider.
When you sell your life insurance policy, the best payout possible—while still far more than the cash surrender value—will not match the death benefit. This means you will inevitably take a net loss by selling the policy. That said, if you no longer need the policy or are unable to keep up with the premiums, chances are selling the policy is still a better choice than keeping it. While you will technically lose some money, you are also eliminating the cost of monthly premiums and putting more money in your pocket now—two things that will make your golden years all the more enjoyable.
We often buy life insurance policies to ensure our loved ones will be taken care of if we’re suddenly gone, but as time goes on those loved ones may no longer need that safety net. You may also simply want to have more money to enjoy your time with those loved ones, in which case selling your policy would also be a great choice. Ultimately, if you’re unsure whether it’s a good option for you, it’s always best to reach out to a trusted life settlement broker who will genuinely care about your quality of life.
Where Is the Best Place To Sell Life Insurance?
The best place to start is by working with a life settlement broker: someone who sells the life insurance policy on behalf of the policyholder. These brokers are similar to stock exchange brokers in that they sell and purchase assets for clients, but they are specifically focused on life insurance policies. Life settlement brokers are experienced in the process of selling policies and can help you find the best deal for your situation. And brokers like Life Settlement Advisors take that a step further, as we are just as interested in your quality of life as we are in making the best sale for you.
Use Our Free Life Settlement Calculator To See if You Qualify!
If you’re still unsure about selling your life insurance policy, our calculator can let you know if you qualify in just a few minutes. Share a few details about yourself and your insurance policy, and get your life settlement qualification score. Then, you can apply with confidence that this decision is right for you.
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
