Can you sell your life insurance policy?

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How can you sell your life insurance policy?

A life settlement is sometimes called a viatical settlement. It occurs when you sell your life insurance policy to a third party for cash. Brokers and settlement companies are most likely to buy a life insurance policy. The third party then takes over the premium payments and receives the death benefit when you pass away.

You will have to meet the requirements listed above, but they may vary slightly based on your location and the third party you work with. For example, brokers and settlement companies are likely to offer you more if you are older or if your health is declining.

Should I sell my life insurance policy?

Selling your life insurance policy is a good option only for a few specific reasons. Suppose your beneficiaries rely on the death benefit to remain financially stable after your passing. In that case, you should keep the policy, but if your beneficiaries are no longer in need of the death benefit, selling may be worth it.

If you have a permanent life insurance policy that you can’t afford to keep, you may want to consider a life settlement. However, if you have term life insurance that you can’t afford, it may be easier to cancel the policy or let it lapse.

Finally, if you have enough money to self-insure, you could consider settling. If you’ve built up enough savings to support your beneficiaries after you pass, you may want to settle your life insurance policy so that you don’t have to keep paying for it.

With that in mind, a life settlement can be more expensive and complicated than most people think. It may be challenging to find a suitable offer since buyers want to make sure they’ll make a profit. In many cases, you may only receive 20% to 25% of the face value of your policy.

In addition to a low settlement, you may have to pay a fee of up to 30% of your payment to a broker. The income may also be taxable or affect eligibility for financial assistance.

What are the alternatives to selling my life insurance policy?

Most people find that alternatives to a life settlement are more manageable and sometimes more profitable than selling their life insurance policy. If you’re having difficulty affording your life insurance policy, there are ways to lower or get out of your premiums that don’t involve going through a lengthy selling process.

Some life insurance companies will allow policyholders to lower their coverage amounts, reducing their premiums. If this isn’t an option with your provider, you may cancel or surrender your policy. Term life insurance policies can be canceled or allowed to lapse without penalties.

If you have a whole life insurance policy, the policy can be surrendered (usually with fees) to receive some of its cash value. You may also borrow against the cash value or use it to pay the premiums if you don’t want to surrender the policy.

Many life insurance policies also include an accelerated death benefit (ADB) rider, which allows some policyholders to receive a portion of their death benefit before they pass away. In most cases, this is for individuals who are diagnosed with a terminal illness, but you can check the requirements with your life insurance company.

If none of the above options work for you, you could also use a 1035 exchange to trade your life insurance policy for a more affordable whole life policy or an annuity.

If you’re searching for more affordable life insurance rates, enter your ZIP code into our free quote comparison tool below to compare policies from companies in your area.

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