Do you have a life insurance policy that no longer serves your needs or one that cannot afford? Are you thinking of stopping payments for the life cover or contemplating cashing it in? You may be glad to know that these are not the only options that you have.
You will not be the first person to sell my insurance in a sale and wind up with some good cash in hand, neither will be the last. However, things may not be as easy as you may be quick to assume.
How Does It Work?
The idea is to convert that life insurance policy you do not want into the cash you need. The process will involve getting your life insurance policy appraised so that you can know it selling value. The next step will be to find a willing buyer then you can get a cash settlement so that the buyer can pay any premiums and receive the benefits upon your demise.
Find an interested buyer is not easy; it may feel like mission impossible. That is probably why most people will opt to sell their life covers to a settlement company or a third party via a life settlement broker. With the settlement agency, you will get a percentage of the value of your insurance policy in cash. But with the broker, you will have to remit a commission to the broker for services renders; but you are bound to get a significantly better deal with the broker than with the company or to opt to go at it alone.
What You Need to Know
Before you rush to sell your life insurance cover, you need to be aware of the following things:
• That market value of your insurance policy may not be as high as you would expect. And you should not expect to get the full-face value of your cover. The U.S. Government Accountability Office says that sellers in 2010 got roughly 13% - 21% of their life insurance policies’ value.
• Brokers offer service and thus will charge a commission. According to a 2009 report done by the GAO, the commissions at that time were around 9% of the sale.
• Not every policy up for sale is something that buyers want. Most of them look for people aged 65 years and above that have a terminal illness so that they do not have to pay premiums for a long time before they can receive benefits. As such, your life cover may not be an appealing investment to a buyer if you are young and healthy.
• Your life insurance policy settlement is subject to income tax; this is an inevitable complication that some people have to face.
• Selling is not your only option especially if you are doing it to get cash. You can consider applying for a loan against your life insurance cover, then accelerate the pay-out date or sell it to a relative or family member. But also appreciate the pitfalls associated with these options and discuss them with an experienced financial adviser to that you can make an informed decision.
How to Sell
Opting to sell is an acceptable move especially if you do cannot afford the premiums or no longer want the cover. If you are intent on selling your life insurance policy to make some money, then you should consider taking the following steps:
1. Understand the rules:
Your cover is subject to some terms and conditions are stipulated by your insurance provider, and these are within the confines of the state laws. Ensure you understand these rules before selling. Seek the assistance of a reputable and experienced financial adviser if there is something you do not fully comprehend.
2. Don’t take the first offer:
Never be in a rush to accept the first offer that comes your way. Take your time to receiver several offers and review each before you make your decision so that you can get the best deal.
3. Talk to an expert:
Even if you feel that you understand the terms and condition, you will benefit from consulting a financial expert, especially regarding matters related to tax liability and changes in your eligibility.
4. Check your debts:
Evaluate your credit history and see if you have an outstanding debt that may see creditors rushing in to claim a chunk of the cash you receive from the sale of your life insurance policy. Discuss your debts with your financial adviser to see what measures you can take.
If you are sure that you do not need your life cover, you should make a call and find out from our insurer what you can get out of it, and exercise caution as you go through with the sale. Ensure that you are getting the best deal possible when signing off the policy.