Selling Your Life Insurance Policy

Life is unpredictable, and sometimes we may find ourselves in situations where we need cash urgently. In such instances, selling a life insurance policy can be a viable option. Selling a life insurance policy means that you are selling your death benefit to a third party for an amount that is less than the death benefit amount. This could be helpful for those who no longer need the policy or can’t afford the premiums.

Why sell your life insurance policy?

There are many reasons why someone might consider selling their life insurance policy. Here are a few:

1. Premiums too expensive

As we grow older, our premiums tend to increase. If you can no longer afford to pay premiums and don’t want to let the policy lapse, selling may be an option. The money you earn could be used to pay off any outstanding debts or invest in other opportunities.

2. Change in financial situation

If your financial situation has changed and your dependents no longer need the policy’s death benefit, then selling it could make sense.

3. Need for cash

If you need cash urgently, selling your life insurance policy could be an option to explore.

Pros
Cons
The immediate cash payout could be helpful in times of need.
The cash payout is less than the death benefit amount.
You no longer need to pay premiums.
There may be tax implications.
It may be a way to pay off debts without taking on new loans.
You lose the death benefit that your dependents would have received.

How to sell your life insurance policy

Selling your life insurance policy requires a few steps:

1. Determine eligibility

Not all policies are eligible for sale. Policies with low death benefits, policies that are relatively new, and term life insurance policies generally do not qualify. You should consult a financial advisor to determine whether you are eligible to sell your policy.

2. Get a quote

Once you determine your eligibility, you should shop around for different offers from viatical settlement providers. After receiving multiple quotes, you can determine which offer is the best for you.

3. Complete the necessary paperwork

If you decide to sell your policy, you will need to complete the necessary paperwork. The viatical settlement provider will provide you with the paperwork, which may include a life expectancy report and medical records.

4. Receive the payout

After the paperwork is complete, the funds will be transferred into your account. You may be able to receive a lump-sum payment or structured payments over time.

FAQ

1. How much can you expect to receive when selling your life insurance policy?

The amount you receive will depend on the death benefit amount, your life expectancy, and the premiums that you would have to pay if you continued to hold the policy.

2. Is it safe to sell your life insurance policy?

Yes, it is safe to sell your life insurance policy. However, you should only sell your policy to a reputable viatical settlement provider. Do your research before proceeding with any sale.

3. Will selling my life insurance policy affect my taxes?

Yes, selling your life insurance policy may affect your taxes. The payout you receive may be subject to income tax. Consult a financial advisor for advice on your specific situation.

4. What happens to the policy once it’s sold?

Once the policy is sold, the new owner takes over the premiums and becomes the beneficiary of the death benefit.

5. Can I sell a term life insurance policy?

Generally, term life insurance policies do not qualify for sale. However, some providers may consider buying convertible term policies. Please consult with a financial advisor for more information on whether you can sell your term life insurance policy.