Did you know you can sell all or a portion of a life insurance policy, even term insurance?
(3 minute read)
If you have a life insurance policy you no longer want or need, you might be wondering what your options are. Do you have to let your policy lapse? Or, can you recoup any of the money you spent on premiums?
The good news is, there are opportunities other than lapsing on your policy, including surrendering a policy and selling a life insurance policy via a life settlement. In this blog, we’ll explore the ins and outs of your options, how a life settlement works, and how to find the best company to sell your life insurance policy to.
What Are Your Options for Selling a Life Insurance Policy for Cash?
There are three basic ways to get rid of a life insurance policy: lapsing on it, surrendering it, or selling it with a life settlement. Here is a bit of information about each option.
Lapsing on it: Lapsing on a life insurance policy occurs when a policyholder stops paying their premiums and—depending upon the terms of the policy—when the cash value of the policy has been exhausted. While lapsing on a policy does mean you don’t have to pay premiums, it also means you won’t recoup previously paid premiums, and your beneficiaries will not receive a benefit.
Surrendering it: Surrendering a life insurance policy involves agreeing to take the cash surrender value of your policy. In return, you’ll stop paying premiums and will forgo the death benefit. How much do you get when you surrender a policy? The average surrender value is roughly $460 for every $100,000.
Selling it: The final option is a life settlement. A life settlement is the sale of all, or a portion, of an existing life insurance policy for a one-time lump sum payment. With a life settlement, a third-party buyer takes over the responsibility of paying all the premiums. In return, they become the beneficiary and receive the death benefit when the original policyholder dies. How much do you get when you sell a life insurance policy? Life settlements generally offer about 20% of the policy’s death benefit—a dollar amount that’s often significantly higher than the surrender value. As such, a life settlement, if you qualify, is often the best option.
How to Sell My Life Insurance Policy
If you decide selling your policy is the best option, there are several steps you should take to get started.
Check If You Qualify
There are a few basic qualifications you’ll need to meet to be able to sell your policy, including being over 65 years of age (with the ideal candidate being over 70), having a life expectancy of less than 15 years, having a change in your health since the policy was issued, having a policy with a payout of at least $100,000, or more. Life Settlement Advisors offers a free life settlement calculator to expedite this process.
Fill Out an Application
Once you know you meet the basic requirements, you should fill out an application. The application will ask about your policy, lifestyle, family history, medical history, and more. You will also be asked to provide copies of your policy, policy illustration, most recent annual statement, and a copy of the trust (if your policy is trust-owned).
Have Your Application Reviewed
Once submitted, life settlement companies will review all the information to determine if you qualify to enter the market. Most companies will work with a third-party underwriter to ensure the process is both accurate and unbiased.
Get an Offer
When your policy enters the life settlement market, offers will be made. The life settlement company you’re working with will provide you with those offers, and you can either accept or reject them. Many individuals work with a life settlement broker or financial advisor to review the offers.
Sell the Policy
Once an offer is accepted, you will receive a closing packet that contains a contract with disclosures, an insurance verification, a change of ownership form, and more. Once you complete the packet, you will receive your one-time lump sum cash payment and the buyer will assume your premiums.
What Is the Best Way to Sell a Life Insurance Policy?
The best way to sell your life insurance policy is by working with a trusted life settlement company that will walk you through the entire process. The best companies that buy life insurance policies will do the following:
- Educate you on the process and answer any questions you have
- Offer free consultations so you can decide if this is the right choice without spending money
- Act clearly and transparently every step of the way
- Provide excellent customer service to make your life settlement process as easy as possible
In short, it’s important to choose a company that you can trust. At Life Settlement Advisors, we have more than 50 years of combined experience in the industry. Our goal is to provide sound advice to each one of our clients by educating them on the process to help them make the best decision possible for their unique situation. Contact us today to learn more.
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.
Life Settlement Advisors