Most people don’t know you can sell your life insurance policy for cash. This process is called life settlements or viatical settlements.
Selling your policy can give you much-needed cash to help with financial burdens, such as medical bills or housing costs. It can also be used for other purposes, such as taking a dream vacation or paying off debt.
Selling a life insurance policy can be a difficult decision, but it may be the best option if you need cash now. If you’re considering selling your life insurance policy, there are a few things you should know. In this article, we will walk you through the process of how to sell your life insurance policy for cash.
We will also provide information on what to expect during the sale process, and what you can do to get the most money for your policy. So without further ado, let’s get started.
What Kind Of Life Insurance Can You Sell?
Before you can sell your life insurance policy, you need to know what kind of policy you have. There are two main types of life insurance policies: term life insurance and whole life insurance.
Term Life insurance
When it comes to term life insurance, the policy is only active for a certain period. This period is typically 10-20 years. Once the term expires, the policy is no longer in effect and you will not receive any death benefits.
However, you can usually renew the policy at a higher premium and extend the coverage. This type of policy is less expensive than whole life insurance, but it does not build cash value over time.
Whole Life Insurance
Whole life insurance policies, on the other hand, are active for your entire life. As long as you continue to pay the premiums, the policy will remain in effect.
Whole life insurance policies also have a cash value component that builds up over time. This cash value can be used to help pay premiums or borrowed in the form of a loan.
If you are looking to sell your whole life insurance policy for cash, keep in mind that you will need to repay any outstanding loans plus interest before the sale can be completed. Also, not all types of life insurance can be sold, so be sure to check with your agent before proceeding.
Find a Life Settlement Broker
The first step in selling your life insurance policy is to find a life settlement broker. A life settlement broker is a company that buys life insurance policies from people who no longer want or need them. There are many life settlement brokers out there, so it’s important to do your research to find the best one for you. Some factors you may want to consider when choosing a life settlement broker include:
- The size of the company: You’ll want to make sure the company you choose is large enough to have the resources to buy your policy.
- The company’s reputation: Make sure the company you choose has a good reputation. You can check out online reviews or ask family and friends for recommendations.
- The company’s fees: Some life settlement brokers charge upfront fees, while others only charge a commission if and when they sell your policy. Be sure to ask about fees before you choose a broker.
Check if Your Policy is Eligible for a Life Settlement
Not all life insurance policies are eligible for a life settlement. To be eligible, your policy must meet the following criteria:
- You must be at least 18 years old.
- The policy must have a death benefit of at least $100,000.
- The policy must be owned by you (i.e., not by your employer).
- You must be the primary insured person on the policy (i.e., not a child or grandchild).
If your policy meets all of the above criteria, then it may be eligible for a life settlement. However, other factors will affect whether or not your policy is eligible for a life settlement. These include your health, the type of policy you have, and the company that issued the policy.
Get an Appraisal
After you’ve decided to sell your life insurance policy, the next step is to get an appraisal. The appraisal will give you an estimate of how much your policy is worth. There are two main types of appraisals: medical and non-medical.
- Medical appraisals are more accurate but also more expensive. For a medical appraisal, you will need to undergo a physical exam and provide information about your medical history. Based on this information, the appraiser will determine your life expectancy. This type of appraisal is typically used for policies with face values of $1 million or more.
- Non-medical appraisals are less expensive but also less accurate. For a non-medical appraisal, the appraiser will use public records to estimate your life expectancy. This type of appraisal is typically used for policies with face values of $500,000 or less.
Negotiate the Sale
Once you’ve received an appraisal, it’s time to negotiate the sale of your policy. The buyer will make you an offer, and you can either accept or reject the offer.
If you accept the offer, the buyer will pay you the agreed-upon amount, minus any commissions or fees. If you reject the offer, you can try to negotiate a higher price or simply walk away from the deal.
Keep in mind that life settlement offers are usually below the policy’s face value. This is because the buyer is taking on the risk that you will die before your life expectancy. However, if you’re healthy and have a long life expectancy, you may be able to get a higher price.
Complete the Sale
When you’ve reached an agreement with the buyer, it’s time to complete the sale. The buyer will pay you the agreed-upon amount, minus any commissions or fees. Once the sale is complete, you will no longer be the owner of the policy and will no longer be responsible for paying the premiums.
It’s important to note that life settlements are not reversible. Once you sell your policy, you cannot buy it back or cancel the sale. Make sure you’re certain you want to sell your policy before moving forward with a life settlement.
As you can see, selling your life insurance policy for cash is a relatively simple process. However, there are a few things you need to keep in mind before moving forward.
Make sure you understand the process and have realistic expectations about the amount of money you’ll receive. Hopefully, this guide has given you the information you need to make an informed decision about whether or not a life settlement is right for you.