How to Sell Your Life Insurance Policy

Older man shaking hands with a financial professional after accepting a life settlement offer

You purchased your life insurance policy when your children were young or you financially supported your spouse. Now that your children are grown or your spouse no longer needs your financial support, your insurance needs have changed. Your beneficiaries are not likely to need the death benefit that it pays out. 

The¬†Life Settlement process¬†allows you to sell your current policy for cash to a third-party buyer for a lump sum. You get a cash payout worth less than the death benefit but more than the policy’s surrender value. You can use the money however you would like.¬†

Settlement Benefits Association can help you maximize the value of your life insurance policy and manage the legal aspects of the sale. Learn more about the process of a Life Settlement.

Can You Sell Your Life Insurance Policy?

Your life insurance policy belongs to you. Like any other property or asset you own, you can sell it. You can sell your term life insurance policy for cash, following a decision by the U.S. Supreme Court in 1911. Multiple factors affect the value of your policy and the amount that a buyer may pay for it. 

A buyer may be more likely to purchase your life insurance if it has a high face value and you are older or have a short life expectancy. Buyers take on the responsibility of paying the premiums on your policy. The fewer premiums they pay, the more valuable the policy is to them and the more they are likely to pay for it upfront.

There may be restrictions on the sale of an insurance policy. For a Life Settlement, you should be over the age of 65. You can be any age for a Viatical Settlement but must have a terminal illness that reduces your life expectancy to fewer than two years.

How Can I Sell My Life Insurance Policy?

The Life Settlement process with Settlement Benefits Association consists of three steps. 

1. Informal Discussion

If a life settlement is a good choice, you will complete a preliminary life insurance appraisal request.

The first step when selling your life insurance policy is to talk to us. We will explain the Life Settlement options available to you.

We will also examine your policy and current situation to help you determine if a Life Settlement is viable. If a Life Settlement is a good choice, you will complete a preliminary life insurance appraisal request.

You are under no obligation to continue at this stage and throughout the Life Settlement process. You can change your mind and decide not to sell until the end of the rescission period. 

2. Review and Evaluation

After we receive your preliminary life insurance appraisal request, we begin the review and evaluation process. During this phase of the process, we gather more information from you and look for buyers for your policy. The steps involved include:

  • Collect medical records:¬†We will gather your medical records from your physicians and care team. We use your existing medical records ‚ÄĒ there is no need to undergo a medical exam.
  • Perform mortality analysis:¬†We work with third-party life expectancy underwriters and purchase up to four life expectancies for the insured. Your life expectancy impacts the value of your policy.¬†
  • Analyze policy value:¬†We collect detailed information about your policy from the insurance carrier to analyze its intrinsic value. Using that information, we determine the best way to present your policy to buyers.
  • Discover buyers:¬†We look for buyers interested in purchasing your policy.
  • Present the case:¬†We update our information about your policy before presenting your case to potential buyers. We aim to develop a strategy that can maximize your policy’s value when we present it.
  • Negotiate offers:¬†We work to obtain competitive bids on your policy. The more competition there is for your policy, the more buyers are willing to pay. The negotiation phase may consist of several rounds. The ultimate goal is to get your policy the highest price possible.
  • Communicate offer:¬†Once we have what we believe is the best offer, we will present it to you. You can review the offer and decide if you want to move forward. You are not under any obligation, and there is no cost to you.

3. Contracts and Change of Ownership/Beneficiary

Once you have decided to accept the offer, we begin the third step in the Life Settlement process ‚ÄĒ contract review and signing. After all parties have signed the contracts, the transfer of ownership takes place, and you receive your cash settlement.

The steps in the process include:

  • Contracts delivered:¬†After you accept an offer, we order contracts from the buyer. You receive the contracts with detailed instructions and explanations.¬†
  • Contracts signed and returned:¬†You review the contracts and sign them. We are here to answer any questions as you read over the contracts. Once you have signed the contracts, return them to Settlement Benefits Association.¬†
  • Additional review:¬†We complete a further review once we have the signed contracts. The Life Settlement provider who either is the buyer or represents them also reviews the contracts, as does the escrow facility.¬†
  • Collection of outstanding items:¬†If additional items are needed before the process can be completed, we collect them at this stage. We then review those items before completing the closing package.
  • Agreement and change of beneficiary:¬†All involved parties receive and review the closing package. After the agreement, we submit change of ownership and change of beneficiary forms to the insurance company. We make every effort to expedite this part of the process.
  • Cash settlement:¬†When the Life Settlement provider and escrow facility receive confirmation of the change of ownership and change of beneficiary, you receive your cash settlement. The escrow funds your cash settlement based on your instructions.¬†
  • Rescission period:¬†After receiving your cash settlement, you enter into the rescission period. During this phase, you may change your mind and return the settlement money in exchange for receiving the policy again. The length of the rescission period varies by state but is often 15 days.¬†

How Long Does a Life Settlement Take?

Generally the process when working with Settlement Benefits Association takes between six and eight weeks.

The length of the Life Settlement process varies based on several factors, including your insurance carrier, state, and the buyer. Generally, the process when working with Settlement Benefits Association takes between six and eight weeks. Here is a breakdown of how long each part typically takes:

  • Medical records collection:¬†The process of collecting your medical records can take one to five weeks, depending on how responsive your medical providers are.
  • Analyze value:¬†It can take between one and two weeks to analyze your policy’s value and find buyers.
  • Case presentation:¬†We can take up to a week to determine the best strategy for your policy and present it to buyers.
  • Offer communication:¬†After we provide you with the best offer, you may need up to one week to review it and decide how to move forward.
  • Contract delivery:¬†The buyer may need three to five days to prepare the contracts and deliver them to you.
  • Contract signing:¬†After you receive the contract, you and any other parties may need up to a week to sign and return them to us.
  • Additional review:¬†We review the closing package, as does the escrow facility and Life Settlement provider. This process can take up to one week.¬†
  • Collection of outstanding items:¬†We may need an additional week to collect any outstanding items before finalizing the agreement.¬†
  • Change of ownership and beneficiary:¬†Once everything is in order, the change of ownership and beneficiary process can take up to 30 days. How long this phase takes depends on your insurance provider.
  • Cash settlement:¬†After the change of beneficiary and ownership is complete, you will receive your cash settlement, usually in a day or two.
  • Rescission period:¬†Once you have your settlement, you typically have up to 15 days to change your mind. In the rescission period, you may return the money and take your policy back. If you are happy with the process and your settlement, you can consider the Life Settlement process finished before the rescission period ends.¬†

Can I Do Anything to Speed up the Process?

You may wish to speed up the Life Settlement process. While some steps are beyond your control, such as waiting for the insurance company to change the owner and beneficiary, there are times when you can help expedite the process. Before medical records collection, you can contact your care providers and let them know we will be requesting the records. You can also review and sign the contracts quickly.

Older woman reviewing a life settlement offer at her computer
Older woman reviewing a life settlement offer at her computer

Reasons to Sell Your Insurance Policy for Cash

Reasons to sell your insurance policy for cash

 

Life insurance has its purposes, but you may have outgrown the need for a policy. Your life situation may have changed enough that you are better served by selling your policy than keeping it. While each person’s reasons for selling a life insurance policy will differ, some of the most common reasons for a Life Settlement include:

  • Changes in the beneficiary’s financial situation:¬†The death benefit of a life insurance policy is typically designed to support dependents. Parents of young children usually purchase policies to protect their children. Once your children are grown and have their own source of income, they are much less reliant on your financial support. ¬†
  • Need for cash:¬†You may find yourself in a situation that requires an influx of cash, such as unexpected medical bills. It could also be that you want to travel or make a large purchase and need cash to cover it. ¬†
  • Eliminate life insurance premiums:¬†As long as you have a term or whole life insurance policy, you must pay premiums. Those premiums are just another monthly expense. Eliminating them would free up cash in your budget and allow you to purchase more useful or valuable items. Removing your monthly premium payment can help you adjust your budget as other living costs increase.

Who Will Buy My Life Insurance Policy?

As a Life Settlement broker, we help you find the best company to sell your life insurance policy to. The companies that buy your life insurance policy are called Life Settlement providers. They are often banks or other companies who view the purchase of life insurance policies as an investment. 

After buying a policy, the Life Settlement provider pays the premiums and collects the death benefit once the original owner passes away. Ideally for them, the value of the death benefit will be more than they paid for the policy and premiums combined.

As part of the Life Settlement process, we work to increase your policy’s price. We do so by collecting bids from multiple buyers. The more demand there is for your policy, the more buyers will pay. We work to get the most bids possible in order to increase competition and the value of your policy. ¬†

How Much Can I Get for My Life Insurance Policy?

How much you can sell your life insurance policy for depends on the size of the policy and your life expectancy. The demand for your policy also affects its sale price. Your health and the cost of the premiums also play a role. 

In many cases, people in the best health will not get the best offers on their life insurance policies. The buyers do not want to risk buying a policy they will need to pay premiums on for many years. The cost of the premiums can also make a policy more or less valuable. If the premium payments are low, buyers may be more likely to submit competitive offers on the policy.

A policy with a high death benefit will get higher offers than one with a low death benefit. Usually, the minimum policy amount is $100,000.  

Contact us to see how much your life insurance policy may be worth to a buyer. We are happy to examine your policy and situation and provide an idea of whether a Life Settlement will be valuable to you. There is no obligation for this initial, informal chat.

Will I Pay Taxes on My Life Settlement?

Whether you pay taxes on your Life Settlement depends on the type of settlement and how you use the proceeds. If you are terminally ill and pursue a Viatical Settlement, you may not have to pay federal tax on it. State tax laws vary.

Our tax estimator can help you better understand the potential tax obligations of a Life Settlement. We recommend showing the results of the tax estimator to your tax preparer or accountant. They can give you a better idea of your responsibility and what you may owe the government after a Life Settlement.  

Work With Settlement Benefits Association to Start the Life Settlement Process

The first step when selling your life insurance policy is to talk to us. We will informally evaluate your policy and situation and give you a better understanding of your Life Settlement options. From there, you can decide whether to continue with the sale ‚ÄĒ there is no obligation.¬†

Use our Visual Valuator to get started with the Life Settlement process. 

Work with Settlement Benefits Association to start the life settlement process

Frequently Asked Questions (FAQs)

Life Settlements follow a defined three-step process, and we are here to guide you at every stage. Learn more about the process by exploring our online resource to see the steps involved.

Those who purchase life insurance policies in exchange for a settlement do so as an investment. In the secondary market, buyers are often institutional investors, such as banks or credit unions. Other groups may purchase policies to bundle and resell proportional interests to individual investors, much like traditional mutual fund shares.

At Settlement Benefits Association, we have long-term relationships with over 20 trusted funding groups for your peace of mind.