As people grow older, their ability to pay for life insurance deteriorates. There can be many reasons for this to happen. Maybe the premiums were getting costlier, or they didn’t find a use for life insurance anymore and want to use the money for something else. Selling to companies that buy existing life insurance policies is an excellent way to get cash in return. This way, you can pay off any outstanding expenses. However, selling your insurance is a complex decision that needs much thought before you dive in.

If you’re thinking of selling your policy, you need to put in much thought. You have to understand how it works, who can help you out, where you should sell it, and what are the repercussions of selling your policy. When you sell your policy, you don’t have to keep paying the premiums, and you don’t have to be responsible for your beneficiaries any longer when you pass away.

Selling your life insurance policy:

When you decide to sell to companies that buy existing life insurance policies, you need to ensure that they are a trusted and reputed organization. The buyer that you and the agent settle on will become the new owner of your insurance policy, and they will have to pay the premiums in the future. They will also receive any death benefit when you pass away. The selling process is also called a life insurance settlement or a viatical settlement. The agreement may allow you to get more cash for the policy, but it will be less than the face value/death benefit.

How does it work?

When you select companies that buy existing life insurance policies, your next step is to look for a buyer. You can choose to do this step on your own, but it helps if you have a professional to help you out. An agent will help you find various offers to buy the policy. When you approach a settlement company, you will have to show your insurance documents and medical records so they can gain access to it before they are given to the buyer. The settlement agents fix a price on your insurance policy based on the following factors:

 Age and health

Policy type

 Surrender value

 Premium amount

The buyer will pay you the cash that you have agreed on, and they take on the responsibility of paying the monthly premiums. So, when you pass away, the new owner of the insurance policy will receive the death benefit. This is because the amount that you have paid for the policy is quite less when compared to the death benefit, and the premium payments will continue.

When is it a good idea to sell your insurance policy?

Not everyone is suitable to sell an insurance plan. Some people are suited for it, and some are not. If you have a universal insurance policy or any policy that has a face value more than 250,000 dollars, then it’s considered attractive to buyers and settlement companies. Hence, you will receive attractive offers as well.

However, having an attractive policy is not the only option. The decision of selling your life insurance is mostly suited for senior citizens, people who are over the age of 65 and those who are chronically or terminally ill. It’s also a rational decision to make if you have changed your lifestyle and don’t have to provide for dependents anymore.

At times, if you can’t afford to pay the premium, then you can sell your life insurance. It’s a good idea to thoroughly check your options before you go forward with your decision. Do your research and ask your financial advisors for professional suggestions as well. If you do decide to sell, then you need to keep in mind the cash that you receive will only be a part of the face value of your policy, and the amount that your beneficiaries would have received upon your death.

Alternatives to selling your life insurance policy:

The life insurance settlement is one of the many options you will notice when it comes to selling your insurance plan. There are other options to consider instead of selling your plan; some of them are listed below:

  • Taking a loan from your cash value policy; this is usually a tax-free choice, and the life insurance plan will remain active.
  • If you have a terminal illness, you can ask if your insurance policy has a clause that allows you to access the death benefit early. This is also a tax-free decision, but your death benefit will be reduced if you take the amount from the policy too soon.