How to Sell Your Life Insurance Policy for Cash?

Have you thought about canceling your life insurance policy? Before you do that you should know selling your life insurance policy could be an option.

As changes in life occur, it can trigger the need to adjust your financial plan. This frequently includes the need for adjusting your life insurance coverage. In some cases, when coverage is no longer needed, life insurance policies can be canceled or surrendered in return of a payout of the cash value.

But there is a way to sell your life insurance policy for more than just its cash value, which could put more money in your pocket. This is through a life settlement transaction.

Who can sell their life insurance policy

In some cases, a life policy can be sold via a life settlement transaction to a third party in return for a cash payment. Doing so may allow you to receive more money than if you just merely “cashed out” the policy.

A life settlement transaction involves selling your life insurance policy to a third party who takes over as the owner and the beneficiary of the coverage. The purchaser / new policy owner will continue to pay the premiums on the coverage.

When the insured passes away, the “new” beneficiary will receive the death benefit proceeds from the policy.

Who can’t sell their policy for cash

Some life insurance policies have no value to a buyer. A life settlement is supposed to be a win-win for the buyer and seller of the plan. If you have a long life expectancy, no buyer is willing to give you cash and then pay the premiums for the next 20 or 30 years. It does not make sense. So here are some scenarios where your policy will not have any value.

  1. It’s a term policy with no conversion option (unless you’re terminal)
  2. The policy has a small death benefit
  3. You have a long life expectancy
  4. You have extremely high premiums in relation to the death benefit

Steps to sell your life insurance policy

If your life insurance policy qualifies for purchase through a life settlement, there are several steps that you’ll typically need to follow.

  1. The first step is to contact a life settlement specialist who can quickly review your policy and determine whether or not it qualifies to be sold.
  2. Provided that your policy is qualified, the next step is to submit the information in order to have its value appraised.
  3. A key component to your policy’s value is connected to your (the insured’s) health condition and potential life expectancy. This will require a review of your medical records. (Here, the more quickly your medical records are received, the faster you may receive an offer to purchase the policy).
  4. Once your policy and medical records have been thoroughly reviewed (which could take up to several weeks), you may begin receiving offers from potential purchasers. Then, after you and your life settlement specialist have reviewed the offer(s) received, you can move forward with a sale of the policy.

Who is a good candidate to sell their policy

While not everyone will qualify to sell their insurance policy through a life settlement transaction, good candidates may include those who:

  • Are age 65 and over
  • Have a face amount of $100,000 or more on their policy
  • Have had their coverage in force for at least two years or longer
  • No longer need or want the coverage (due to changes in financial needs and / or the premium becoming unaffordable)