Can You Sell Your Life Insurance Policy – The relevance of your life insurance policy can change over time due to life circumstances and how fast the world is changing. Many policyholders often find themselves in a situation of selling their life insurance policy instead of letting it lapse or surrendering it for a lesser cash value. For people in need of liquidity, the idea of selling a life insurance policy, also referred to as a life settlement, can offer instant financial advantage.
A time may come when you decide you no longer need a life insurance policy due to a number of reasons. For instance, probably you’re unable to meet up with premiums payment. Whatever the case may be, it is possible to sell your life insurance policy to someone through a life settlement.
In this article, we would walk you through the steps involved in selling a life insurance policy. Also, we will highlight important considerations and possible benefits attached to selling a life insurance policy.
Can You Sell Your Life Insurance Policy?
Of course, you can. Selling a life insurance policy is one of the easiest ways to free up funds and gain access to other benefits depending on the type of policy you have. If you realize you no longer need your life insurance policy. Or there are changes in your financial situation, you can sell it to a third party.
However, you can only sell a life insurance policy to a third party if you are the named insured. And also the owner of the policy. In a situation where you took out the policy on behalf of someone, the chances of selling it are very slim.
Notwithstanding, several states require policyholders to pay the premiums on the policy for a specific period of time before it is considered eligible to be sold out. Usually, you must own the life insurance policy between the period of two to five years. However, this depends on your state and insurer.
That being said, it is important to know the requirements needed to sell a life insurance policy in your state before taking the step. This would give you enough time to review your policy to check whether selling it is an ideal option.
How Do Life Settlements and Viatical Settlements Work?
There are two major ways through which a policyholder can sell out their insurance polic. You may decide to go the life settlement or viatical settlement way. The choice depends on your unique circumstances and needs. These two types of settlements allow you to sell out your life insurance policy, but they are used for different purposes.
For instance, life settlement is designed for policyholders who do not have a critical or chronic health condition. If the reason for selling your life insurance is due to a financial change and you are unable to afford the premium. It is important you go through the life settlement route is the best option.
On the other hand, a viatical settlement is specifically designed for those with terminal or chronic health issues. If you were diagnosed with a critical condition and you intend to sell your life insurance policy. A viatical settlement can help to lift the burden that comes with the expenses of treating your illness and the final cost. In essence, a viatical settlement is used when the life expectancy of the policyholder is less than 2 years.
How to Sell Your Life Insurance Policy
If you share a motive of selling your life insurance policy, here are steps you should follow:
Check If You Are Eligible to Sell the Policy
Eligibility criteria for selling life insurance vary by state and insurance company. It is important to check if you are eligible to sell out your insurance policy to a third party before going through the process. Contact your insurance company and let them know of your intention to sell your policy. Depending on your situation, decide whether you should opt for a life settlement or a viatical settlement.
Check the Value of Your Life Insurance Policy
This is an important step to take when selling your insurance policy. In the process of applying for a life settlement, several companies will give an appraisal of how much value they think your policy is worth. This will give you an idea of the exact value of your policy and the best offer to settle for.
Choose a Life Settlement Company
Once you have determined the value of your life insurance policy, the next thing is to look for a life settlement company that helps with the selling of policies. Shop around to find a company that offers the best settlement rate and that which aligns with your unique needs.
Complete the application
To get a life settlement, most companies require you to complete an application. This can either online or in person, depending on the company. You will be required to provide information about yourself and essentially your health. Ensure you provide accurate information.
If your application is approved, the life settlement company will reach out to you. And make an offer for the type of policy you intend to sell. Receive the offer and negotiate the terms; consider your unique situation in this process. Let’s say you are satisfied with the offer from the settlement company. You can transfer the ownership of the policy to the company or third party that shows interest in buying.
What to Consider Before Selling Your Life Insurance Policy
Before selling your insurance policy to a third party or life settlement company. Firstly, we strongly advise you to get offers from multiple companies. By gathering offers and comparing quotes from different companies, you can potentially find the best offer.
You can as well work with a professional life settlement agent who will assist you with the process of negotiating terms and making other informed decisions.
FAQs
Can I sell just part of my life insurance policy?
Well, it is possible to find a settlement company that allows you to sell part of your life insurance policy instead of the whole policy. How it works depends on the company you decide to work with.
You can sell a portion of your policy in exchange for a specific amount of money. The remaining death benefit will be given to the beneficiaries in the event of your passing.
How long does it take to sell a life insurance policy?
Usually, the amount of time it takes to complete a life insurance sale takes between 1-6 months. The exact period of time largely depends on the type of life settlement company you work with.
Can I still sell my life insurance policy if I have a loan against it?
It is possible to find a life settlement company that allows you to sell your policy even if you’ve taken a loan against it. In most cases, a permanent life insurance policy can be sold regardless of whether there’s a loan on it or not. Nevertheless, the settlement company will pay off the loan and give you what’s left on the policy.
