Sell Your Life Insurance Policy

What are Your Options for a Life Insurance Policy You Don’t Need?

Life settlements have become increasingly popular in the last three decades as seniors no longer need life insurance policies they’ve held onto for years. But is a life settlement the only option for someone who no longer needs their life insurance? What if you still need life insurance, but your policy and premiums are just too big?

Life Settlement Definition

A life settlement allows anyone over 65 to sell their life insurance policy to a third party. You will sometimes see this referred to as a secondary market. When the Supreme Court determined that life insurance policies are property; that opened up the way for people to buy and sell them.

The goal of the seller is to get more for a life insurance policy that they don’t need than the life insurance company would offer them if they surrendered the policy for its cash value.

The goal of the buyer is to buy a life insurance policy for a fraction of the death benefit. They become the beneficiary and takeover premium payments.

This way the seller gets rid of a policy that is no longer useful and costing them money every month and the buyer receives a massive payout sometime in the future when the seller dies.

Who is a Good Candidate for a Life Settlement?

While life settlements are not for everybody, they can be fantastic for the right people. But how do you know if you’re the right person?

If you fit into the criteria below, then pursuing a life settlement might benefit you.

  • You don’t need life insurance at all
  • Maintaining your current life insurance is a burden
  • You have better uses for the money you put toward life insurance premiums each month
  • The beneficiaries of your life insurance policy don’t need the money

If any of the points below sound familiar, there may be better ways to solve your challenge than a life settlement.

  • You plan on getting another life insurance policy after selling your current one
  • You still need life insurance, but the premiums are currently too expensive
  • A surprise debt has come up, leaving you scrambling for cash
  • You don’t need the money from the life settlement
  • Someone pitched you a deal that sounds too good to be true

What Type of Policy Do I Need To Have?

You can sell nearly any type of life insurance policy as a life insurance settlement. Usually, life settlement brokers look for a whole life or universal life policy. They also will take term policies with a conversion option. (Convertible term insurance lets you “trade in” a temporary policy for a permanent one, typically the policy must be converted on or before age 70).

Other conditions are that you’ve held the policy for at least two years. This one is to ensure that a life settlement broker isn’t paying someone to take out a life insurance policy on themselves and then selling it. Life insurance companies may dispute benefits if they think this is the case.

Most brokers will not consider a policy with a benefit of less than $100,000. There are exceptions to this rule. If you think a life settlement may be right for you, it never hurts to get an appraisal.

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