Can you really sell a policy you don’t want anymore?
It can certainly happen, but let me start by saying that not all term life policy can be sold. Selling your life insurance policy as a life settlement only happens if the transaction makes sense on both ends. On your end it means that you need some amount of cash more than you and your family need the life insurance. On the purchasing end it means that after they pay you an agreed upon amount and they take over ownership and payments on the policy, they need to have some sense that it will be profitable in the end.
Is it better to keep the life insurance?
If it is a matter of not needing the policy anymore, or perhaps not being able to afford it anymore, you should first decide what benefit it has to your family if you keep it. If you have outlived the need for the policy, would letting your children take over ownership and the payments as a form of inheritance make some sense? If you’re still in good health it becomes a long term investment for them and, at some point, they may need to convert the policy to keep it in force so the price will go up. It can still be a great investment, but young adults may have a hard time wrapping their heads around that idea.
If your health is bad and because of your health you aren’t able to afford the policy, before selling, have a talk with your family and see if someone is willing to help you keep up the payments with the understanding that they can be paid back out of the death benefit.
Does it make sense to sell?
If you’re in good health and under 70, finding a company to buy your policy probably won’t work. Life settlement companies make their money buying policies when people are over 65 and their health is much worse than when they originally bought the policy. Generally they don’t want to buy policies with death benefits under $500,000. How much your health has deteriorated and what they determine your life expectancy to be will determine if they will buy it, and how much they are willing to pay for it. The policy also has to still be convertible, so the premium of the converted policy is one of the factors. Simply put, the healthier you were when you bought the policy and the sicker you are now, the more money they will offer.
If you have questions or would like to know more about the process, please call or email me directly. My name is Ed Hinerman. Let’s talk.