Policy For Cash When You Need It Most
Not a lot of people are aware that one of the biggest assets they own – and can sell – is actually their life insurance policy. A life insurance policy can be sold if you no longer need it, or if you don’t want to make the premium payments anymore, through a process called a life settlement.
In fact, instead of surrendering the life insurance policy to the insurance company, you’re able to get a bigger cash value with a life settlement. And the process of selling your life insurance policy for cash can take anywhere from a few weeks to a few months.
This is a great way to ensure all of your family members will have no financial worries, in case something ends up happening to you. As long as you meet the right eligibility requirements for a life settlement, you’ll be able to sell your life insurance policy for cash. However, before you’re able to make that important decision, you have to consider the different options you have available and what they mean for your situation.
Life Settlement Considerations
Before finalizing your decision regarding the type of settlement, you should look over your health and your current life situation. You should also know that with either option, the life insurance policy you have should be a permanent life insurance policy, although in some circumstances a term policy is eligible as well.. And no matter your choice, you’ll still end up with a significant cash payout.
Now, at this point, you also need to be aware that once you do sell your insurance policy, none of your beneficiaries will get a payout. And whoever ends up buying it from you, and becomes the policy owner, is going to receive all of the policy responsibilities, which include making those premium payments. Additionally, upon your death, none of your beneficiaries or loved ones will receive death benefits.
With life insurance settlements, you should get help from a life settlement broker, who is going to guide you throughout the entire settlement process, give you all the help you need with the sale of your policy, and they’ll get a commission for the work. That commission is commonly a percentage of the cash sum you’ll be receiving, and it will be deducted from the cash payment you’re supposed to get before you get the check.
Life Insurance Options
There are a few different options you can choose from if you believe you’re no longer in need of a life insurance policy.
Option 1: Surrender The Policy
You can surrender the insurance policy, and get the accrued cash value back. Just like with any policy, when you’re making the premium payments, you’re actually building up the cash value of your insurance. And once your insurance policy has generated enough value through the premium payments, you can begin borrowing against that sum. If you do end up surrendering it, you’ll get a check for that built-up cash value.
Option 2: Stop Paying Future Premiums
Next, if you believe you don’t need a life insurance policy any longer, and you can simply stop paying any future premiums, and your life insurance policy lapse. Keep in mind that if you do this, the any accumulated cash value will keep the policy in force until the policy eventually lapes. When the policy does lapse, there will be no remaining cash value..
Option 3: Sell Your Policy For Cash
And lastly, since you’re the policyholder, you’re always able to look into selingl your policy, as we mentioned.
But that’s not everything you need to know if you want to get rid of your insurance. You have to consider your situation carefully before making a decision, and you should also know that whichever option you decide to go with – surrendering, lapsing or selling – will result in the life insurance company not providing your beneficiaries with any payout.
Options when Selling Your Life Insurance Policy
Traditional Life Settlement
When it comes to traditional life settlements, the eligibility requirements are quite high, as you’ll need to have a life insurance policy with a value of at least $100,000. You’ll also need to be over 65 years, and have a life expectancy shorter than 15 years. A traditional life settlement is the one that’s most commonly used when someone is selling a life insurance policy.
You also have the option of viatical settlement, which generally has fewer, yet more specific eligibility requirements. This is mainly used by people that have a terminal illness, as the age requirement is flexible. However, your life expectancy still needs to be less than 4 years, and in some cases, less than 2 years.
Additionally, traditional life settlements have some tax implications, while viatical settlements typically don’t. To get a better understanding of the taxes you’ll be paying, and to make the best decision, you can consult with a tax advisor, who can tell you how you can receive a good amount of money.
Selling a Life Insurance Policy
The best way to go about selling your life insurance policy is to work with a broker, who will help you, and represent you in the life settlement process. These are people that already have a network of buyers, and can help you get a bigger sum of money.
Now, the first step you should take is to use a Life Settlement Calculator, which will help you get a better idea of how much money you might end up getting in the life settlement. With these types of calculators, which are available online, you input some of the basic information about yourself and your insurance policy and get an estimation.
After that, you’ll be filling out an application form to sell your insurance policy. In that application, you’ll be providing the broker with basic information about your health status, your life insurance policy, and the demographics. You should also sign a medical release form that helps release all your insurance information to the broker.
In the next step, your broker will be gathering all of the required documentation that’s necessary to sell your life insurance policy, and all of that documentation is sourced from the information you previously provided, so make sure everything in the forms is correct.
Once that’s done, the broker will be reviewing the documentation, your forms, calculating the value of your policy and how much money you can get for your life insurance policy. However, you should be aware that your insurance policy might end up getting rejected if no one is interested in buying it.
Then, you’ll get an offer for the life insurance policy, and it’s between you and the buyer on whether that offer is negotiable. If you don’t like that offer, you can walk away from the sale.
Next up is the finalization process, which means completing the documentation. Aside from you, there are likely going to be other people involved in the process, who will also be signing the documents, and once that’s done, your broker will give you a timeline of when you can expect to receive your payout.
Finally, the money you get from the payout will be transferred into your bank account. You will receive a single lump sum of cash.
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