(3 Minute Read)
As a senior citizen, planning your estate’s future should be one of your highest priorities. Though you may have savings or a pension plan, it’s important to continue keeping a look out for any potential revenue streams, especially after you’ve retired. One untapped source of financial flexibility, either in the form of one less bill each month or a lump payday, is an unwanted or unneeded life insurance policy. But you may be wondering how to surrender a life insurance policy. There are a couple options for getting rid of an expensive policy, and each will produce a different return. Let’s take a look at two of the most popular methods: surrendering a life insurance policy or selling all or a portion of the policy for an immediate cash payment through a life settlement.
How to Surrender a Life Insurance Policy: Quick, Easy, and Basic
If you choose to surrender a policy, this means you’ll be cancelling it directly through your insurer. The benefit of this is that you’ll be able to collect any and all remaining cash value. Upon ending the policy, your premium payments will stop and any saved value will be released to you. However, this amount can vary. Sometimes, surrendering a policy results in no payout at all.
The process is generally quite simple. After contacting your insurer with your intent to surrender the policy, you should be sent a form asking you to put your decision in writing. After mailing this back to the company, they should release your funds in a short matter of time. While these funds may be non-taxable income, it should also be noted that there may be very significant surrender charges if the policy is less than 15 years old. If you’re unsure of whether these fees would apply, be sure to ask your agent to review the plan with you.
Life Settlement: A Better Way?
The decision to terminate a policy is generally based on a lack of need or premiums that have grown to be too high. You may need to fund some unforeseen home repairs or pay for medical expenses; regardless of the reason why you want to give up a policy, though, the end goal should be to receive the maximum possible payout. While surrendering your life insurance policy may seem like a quick and painless way, it rarely will result in you getting the highest possible amount. If you’re looking to truly maximize this source of income, you may be better off selling all or a portion of your policy via a life settlement.
When you choose a life settlement, your policy will be handled by a life settlement expert who will then sell the policy to a third-party investor. In doing so, he or she will seek to find the highest possible bidder to take control of your plan. The policy will remain in effect and the buyer will continue to make premium payments, but first you will be paid in a large lump sum. The greatest benefit of this route is that you’ll have a life settlement expert fighting for your interests. You may be surprised to find out just how much is waiting for you. To get a better sense on whether this route makes the most sense for you and your family, this handy life settlement calculator can give you a preview of just how much your policy may be worth.
If you’re holding onto a life insurance policy that you no longer want, need, or can afford to keep, a life settlement might be the right option. Funding your retirement years is a tricky process, and we want to be there to help. At Life Settlement Advisors, our goal is to help you figure out how to surrender a life insurance policy while getting the biggest possible lump sum available to your unused insurance policy. If you have any questions, are looking to get started, or just need some general advice on selling your life insurance policy, contact us today.