You want your loved ones to be taken care of after you pass away. For many people, life insurance policies are their way of making this happen. But you might find that you’re paying more for your premiums than you can afford, and the potential benefits might not be everything you’d hoped for. So what about selling your life insurance?
Whether you’re in a tough financial situation or just want a little extra pocket change, you might find that the benefits of selling your life insurance policy outweigh the drawbacks.
Photo, Tyler Farmer.
How the Process Works
If you want to sell your policy, you can do so with a life settlement. This works especially well for retirees and others over the age of 65. Your policy may need to exceed a certain amount depending on the company buying it. For example, some companies might only purchase policies with benefits of $150,000 or more.
You might be surprised by how many policies can be sold. Permanent policies like universal life insurance tend to be the best for selling, but multiple different kinds of coverage can be sold. You can review a guide that will help you calculate how much your life insurance policy is worth.
Since you can get your valuation for free, you’ll know whether the transaction is worth it or not right away. It’s also important to compare different settlement companies and their offerings.
Photo, Farsai Chaikulngamdee.
Reasons to Sell Your Policy
There are a number of reasons that you might consider selling your policy. The most common reason is that a person needs cash while they’re alive more than they need their beneficiaries to benefit after they die. Some retirees use the money to improve their retirement, to go on vacation, or to pay for long term care.
Another reason might be a lack of a beneficiary. Some people take out policies to provide for their children after their death. But maybe your children have grown up and no longer need anything from a policy.
Some people sell their policies because of over-insurance. In these cases, you might have multiple policies through yourself or your spouse. Getting rid of one of them can give you liquid cash while still allowing your beneficiaries to benefit in the event of your death.
If your premiums have become too expensive for you to pay every month or year, you can sell your policy for cash now and avoid needing to make future payments.
Photo, Kelly Sikkema.
How Much to Expect
The value of your policy will vary depending on several factors. You’ll need to consider things like the premium costs, the number of benefits in the policy, and what your own life expectancy is.
When a company buys your policy, they will need to keep it active by paying premiums until your death. Therefore, a person with a shorter life expectancy can expect to net more for their sale than someone much younger.
Some companies will only buy life insurance policies from people who have reached the age of 65 or older. The exact regulations vary from place to place.
