Yes, you can sell a whole life insurance policy through a transaction called a Life Settlement. However, there is more to the process than a simple sale. You need to understand the nuances of your life insurance policy and ensure it meets specific sales criteria. You should also know what your alternatives to selling are and the steps that lie ahead if you do choose to sell.
Why Sell Your Whole Life Insurance Policy?
The need to sell a whole life insurance policy is often driven by financial circumstances or life changes that impact the need for a policy. Common reasons for wanting to sell include:
Premium costs: As financial circumstances change, you may find it more difficult to afford the high premiums that come with whole-life insurance policies. Selling the policy is one way to alleviate this.
Cash flow: Many policy owners choose to sell their policy for the funds to pay off debts or medical bills or to use in an investment opportunity.
Changing needs: Your or your beneficiaries’ needs may change over time. Selling the policy may align better with your current conditions if you signed up for the policy to have income protection and no longer need that security.
Estate planning: If you no longer need your whole life insurance policy, selling it may simplify estate planning.
What to Consider Before You Sell
Some life insurance policies are easier to sell than others, as buyers prefer specific kinds of policies. Several types of life insurance policies may be eligible to sell for cash, including:
Permanent life insurance policy: Whole life insurance is a type of permanent life insurance policy.These have a cash value that grows tax-deferred, which the policy owner can use to cover premium costs or withdraw.
Universal life insurance policy: As with the permanent life insurance policy, this one has a tax-deferred, growing cash value.
Variable universal life insurance policy: This policy’s cash value fluctuates based on the underlying investment account’s performance. This policy’s cash value can grow over time, but growth is not guaranteed.
Indexed universal life insurance policy: The policy’s cash value grows based on a stock market index performance, like the S&P 500. This also means that the value will likely fluctuate.
Criteria for Selling Your Whole Life Insurance Policy
A comprehensive understanding of your policy and its terms and conditions will clarify the sales process ahead. Qualifying criteria for a Life Settlement include:
Policy type: Some policies, like a term life policy, may not be eligible for sale. Buyers prefer a whole, convertible term, variable or universal life insurance policy.
Policy value: Your policy must have a death benefit of $100,000 or more to qualify for a Life Settlement.
Policy age: The policy should be at least two years old before you sell it. How old the policy needs to be varies by state.
Policy owner’s age: You must be 65 or older to sell your whole life insurance policy.
Policy owner’s health: A lower life expectancy due to illness or the policy owner’s age may lead to higher offers as buyers are more likely to get a favorable return on their investment.
If you have a terminal illness, you may be able to sell through a Viatical Settlement, which can help you pay medical bills, settle debts and improve your quality of life.
How to Sell a Whole Life Policy
When selling your whole life policy, you must have your life expectancy and policy assessed to allow the buyer to determine the value of your policy. When the sale closes, the buyer becomes the owner and beneficiary of your life insurance policy, taking over the premium payments and receiving the death benefit.
As the sales process can get complex, it is a good idea to partner with an independent broker with the knowledge and experience to help you find the best value for your whole life insurance policy. Here are the general steps to sell your insurance policy:
The broker will use your medical records and projections from your life insurance carrier to source potential buyers. They will present your policy to buyers on your behalf and negotiate an offer to get you the best price.
The broker sends you the offer, and you decide whether to accept.
When you accept an offer, you will sign contracts, making the buyer the owner and beneficiary of the policy. You will then receive the cash settlement and a rescission period of up to 15 days in case you change your mind about selling.
How Much Money Can You Get for Your Life Insurance Policy?
The amount of money you will get for selling your policy depends on how much the policy pays out and how old you are. While a Life Settlement will not pay as much as the policy’s value, you will likely get a decent sale price. If your policy has a face value starting at $100,000 and you are over the age of 65, you may be able to sell for cash.
Alternatives to Consider
Instead of selling, you can look into these alternatives that may meet your financial needs and goals while allowing you to keep your whole life insurance policy:
Accelerated death benefit: Depending on your policy’s terms and conditions, you may be able to access a portion of your death benefit if you have a terminal diagnosis.
Policy loan: You can borrow against your policy’s cash value to preserve the death benefit while accessing funds when needed. Any unpaid loans may reduce the death benefit, which is worth keeping in mind.
Reduce death benefit: You may be able to reduce your premiums by reducing the policy’s death benefit if you want to maintain some insurance coverage.
Policy surrender: If you cannot sell the policy, you may have the option or surrendering it for a cash surrender value. This is typically less than the death benefit.
Get an Offer for Your Whole Life Insurance Policy
The idea to sell your whole life insurance policy is a significant financial choice. Whether you want to sell to meet shifting financial needs, maximize your policy’s value, or pay debts, the decision requires careful consideration.
With over 20 years of industry experience, Settlement Benefits Association is dedicated to helping you maximize the value of your life insurance policy. Our LISA membership ensures we act as fiduciaries and prioritize your best interests. We work on your behalf to find a buyer who will provide you with the highest payout. Contact us today to start the process of selling your whole life insurance policy.