You can sell a term life insurance policy for cash through a Life Settlement. Most term policies that undergo this process are convertible term policies. However, you may have sale options without converting your policy or purchasing a rider for later conversion.
Whether you need a lump sum as soon as possible or want to make the most of your term life insurance, you should understand the options available and the processes involved so you can make a wise financial decision with clarity and confidence.
Term life insurance or temporary insurance meets a provisional need, providing financial benefit to successors if the policy owner passes within a specified timeframe. This type of insurance offers lower premiums while ensuring the beneficiaries have some financial security. Terms are often 10, 20, or 30 years.
Age or a medical condition are the primary reasons policy owners choose to sell their term life insurance policy before the maturity date. Policy owners may want additional funds to pay off debts, increase their retirement funds, or cover medical expenses if they are in poor health. They may also want to avoid paying higher monthly premiums when the level term period ends. To qualify to sell your term life insurance policy, you must meet certain requirements. Consider the following factors:
When you sign up for a term life insurance policy, you can purchase a conversion rider to convert the policy into a whole life policy for added value. This option involves additional fees but allows you to claim back some of the value by keeping the policy with a death benefit rider, long-term care rider or opting for a Life Settlement later. The conversion rider may have an expiration date, so review the rider’s terms and conditions before you convert your term life insurance. You can generally sell your insurance policy at any time following the conversion.
A term life insurance policy does not build up a cash value over time. It terminates after the period set out in the policy agreement or when the policy owner passes. If the policy owner is still alive at the end of this term, the insurance company keeps the premiums they collected. While insurance companies offer the option to renew an expiring policy at a higher premium, you can also sell it before the expiration date.
To sell your term life insurance policy and qualify for a Life Settlement, you need a policy valued at over $100,000, to be in good standing, and to be over 65 or have a terminal illness. Inactive policies are ineligible. If you qualify, you can sell your policy to a third party. They become the new owner and beneficiary and pay the monthly premiums. You receive a lump sum in this sale to use at your discretion. Depending on your circumstances, you can opt for a Life Settlement or a Viatical Settlement:
Aside from selling your term life insurance policy or converting it into a permanent life insurance policy and then selling, you can consider alternative options. You can use a personal loan to help you continue making payments into your policy. This option works best if your loan payment is less than your life insurance premium. If you already have a converted policy, you may be able to reduce your death benefit to reduce monthly premiums.
You can sell your term life insurance policy to investors or companies. Here are the general steps for selling:
The amount you can expect from a Life Settlement depends on various factors. Age, health status, policy carrier, policy value, and market conditions all contribute to the offers you can expect to receive when selling your term life insurance policy to a third party. Remember that life insurance policies do not sell for their entire death benefit value.
Additionally, there may be administrative, transaction, and medical underwriting costs involved in this sale. You may also have to pay tax on the lump sum you get from the sale. For example, if the income you receive from the sale exceeds the premiums you paid to the policy, you will be taxed.
Selling your term life insurance policy can provide you with a quick cash injection, but to qualify, you need to assess your policy’s terms and conditions, your financial situation, health status, and insurance needs for the foreseeable future.
When selling your term life insurance policy, it is best to have an appraisal done by a reputable life insurance settlement broker. Settlement Benefits Association can assist you with an appraisal while representing you to potential buyers, helping you get the highest payout for your policy. Contact us today to start negotiating the sale of your term life insurance policy.