Selling a Life Insurance Policy Early, For Cash

Making the best decision

People across the globe own life insurance, with this type of insurance policy becoming increasingly popular over the twentieth century. Regardless of whether an individual is a policyholder of a universal or term life policy, they are likely covered in some way. 

Moreover, any life insurance company knows that once policyholders have families, they seek security for loved ones should something happen to them. A whole life is an important thing to protect, and in certain events, the cash surrender value of a life insurance policy could be high. And this may be the case regardless of whether it is sold early. The cash value of a death benefit or other life insurance policy payout could be worth looking into.

Life insurance policy Settlements: Why an early sale might benefit certain life insurance policyholders

At the same time, however, as policyholders’ family members become financially independent, the life insurance policies of their parents might be of little use to them. And depending on their situation, the individual who bought this life insurance policy might desire to look into a viatical settlement or other life settlement solution. 

For instance, if a policyholder’s child is financially independent, but they learn of a drastic shortening of their own life expectancy, they might wish to collect a lump sum or other type of payout from their insurance provider rather than keeping their life insurance. Such a payout could help policyholders with terminal illnesses pay medical expenses.

The Settlement Options

Many individuals are aware of viatical settlement providers and life insurance policy brokerage services, in which clients are able to sell their life insurance policy for a cash lump sum. Although many also have questions regarding selling their life insurance policy for cash. For example, they have questions on the tax implications of selling life insurance, and about how much money would be lost in doing so. 

The settlement option of selling a life insurance policy is appealing to some but not others, so the best decision on it takes learning about the subject. Although many people might decide they do not need their life insurance policy any longer, they should know a few other things before choosing a life settlement company, and before choosing to sell their policy.

Reasons to sell a life insurance policy for cash 

Whether you are considering selling a term life insurance policy or a universal life policy, some or all of the value of your policy might be paid out in a life settlement process. Reasons to sell a life insurance policy for cash include: 

• The insurance policyholder no longer needs the policy. For instance, if an individual’s dependent becomes economically independent

• If the policyholder needs additional money for medical bills. In this case, selling the whole life insurance policy for a lump sum of cash might be the best decision.

• Policyholders might also choose to sell their policy for the value of their life insurance if they desire an influx of money for their retirements. 

Other options available to policy owners besides selling 

Any life insurance owner will likely be curious about the options available to them in terms of life insurance policy settlements. For those willing to do away with their permanent life insurance policy, the following options are available: 

Sell your life insurance policy for cash

As mentioned, this is an option for policy owners who do not consider their life insurance policy to be necessary any longer and have need of additional cash in the shorter term. This can be done using the brokerage service of the Apex Settlement Group. 

Let your policy lapse 

If a policy owner simply stops paying their life insurance policy premiums, their policy will lapse. This choice will not provide a payout but will allow policyholders to stop paying life insurance premiums.

Surrender your policy for its cash value 

The final option is to surrender for the accumulated value on your insurance policy. In some cases, the value of the excess premiums paid over time may be returned to the policyholder as a check. 

Importantly, choosing any of these three options will result in the loss of any death benefit being paid out to the policyholders’ families. So it is important to consider whether a cash payout is worth the loss of eligibility for death benefits. 

A cash payment through life settlement may be more important to some, while others might prefer to keep their policy. In any case, the sale of a life insurance policy is an important decision. Moreover, the value of the payout upon a brokerage settlement will be less than the face value of the policy. 

The options if you sell your policy

A traditional life settlement 

With this type of settlement, also known as a senior settlement, a policy owner sells their life insurance policy with a death benefit of at least $100,000. The insurance policyholder must also be 65 years of age or older and have a life expectancy of around 15 years.

A viatical settlement

A viatical settlement involves policyholders who have a terminal illness, and who can verify such a diagnosis. The life expectancy requirement is around two years but can be up to four.

Sales of term life insurance policies 

Although it might be more common to sell permanent types of life insurance, settlement brokerage can also help policy owners sell their term insurance policies. The cost of the payout would depend on the length of the given term of the policy, which is when premium payments were typically made. This period of time can range from 5 to 40 years. 

The settlement process

There are two ways to approach the market for a  life insurance settlement.  Using a broker, who will coordinate the initial information gathering and solicit bids from licensed providers, or going to a provider, or direct buyer, yourself.   The broker will charge a commission, typically percentage of the sale value.Either way, the process is quite similar.  

Online life settlement calculators are good tools for beginning the settlement process. The main steps of this process are outlined below.

The main steps: 

• Application or qualifying information gathering: where the policyholder enters basic information about their health and life insurance policy

• Documentation: the brokerage company will use the information provided  to obtain the policy and health underwriting information they need for the policy valuation.

• Review: the company will determine what the policy in question is worth

• Offer: the policyholder receives a payout offer. The policyholder may decline at any time

• Closing package: official documents from the purchasing provider for the sale are signed 

• Payout: the payment from the sale will be wired in a lump sum to the seller directed account.  

Conclusion 

Any decision involving one’s life insurance policy might take time making. Choices involving the sale of one’s policy, for instance, can be difficult. However both brokers and providers are available to aid policyholders who may be considering this option, and there are resources available for learning about life policy settlements.