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Some are surprised to learn they can sell their life insurance policy just like they have the ability to sell any other asset they own. But the option of selling one’s life insurance policy is an often-overlooked possibility due to its lack of public awareness. However, it’s true; just like you can sell your car or shares of stock, you can sell your life insurance policy.
The process of selling your life insurance is referred to as a life settlement transaction. A life settlement is defined as the sale of an existing life insurance policy for more than its cash surrender value, but less than its net death benefit. There are many reasons why people may want to sell their life insurance policy, including:
- Mounting medical bills
- The policy owner wants to invest in long-term care
- The premium is no longer affordable
- The policy no long meets the policyholder’s estate plan goals
- The policyholder no longer has dependents who are reliant on their income
- Simply no longer need the policy
- Replenish the nest egg that has been strained by record inflation
- Funds are needed to pay for grandchildren’s college
- Funds are needed to pay for travel
- Funds are needed to avert bankruptcy or pay off debt
However, not all types of life insurance policies qualify for a life settlement. There are a few eligibility requirements to be aware of, the most important of which are:
- Age and health: In general, to qualify for a life settlement, the policyholder should be 65 or older, though younger individuals may still qualify. Specifically, policy owners who are 75 or older and in average health may qualify. Those who are 60 or older may qualify if they are in below average health, and those under 60 can qualify if they are in critical health.
- Type of policy: The majority of life insurance policies sold are universal or term policies, though others may still qualify.
- Premiums: The amount of premium payments required to keep the policy in force will play a role as to whether the policy can be sold or not and for how much.
- Death benefit: Also known as the face value, policies with a death benefit of more than $100,000 are usually easier to sell as they are more attractive to an investor.
A life settlement is a solution more and more seniors are becoming aware of and embracing. In fact, 90% of seniors who have let a policy lapse would have considered selling it if they had known a life settlement was a possibility.
For millions of Americans who own a life insurance policy, letting it “lapse,” or missing a premium payment, means a surrender of the policy and getting nothing in return. Imagine paying into an asset for several years, only to be left with nothing of value if a policy lapses or is no longer worth keeping. Whatever the reason, many senior policyholders may be eligible to sell their life insurance policy for cash, which can provide funds when they need it the most.
If you do choose to sell your life insurance policy for cash, there are qualified companies to assist with the process. A life settlement specialist can you sell your life insurance policy for cash. Once the sale is complete, ownership of the policy is transferred to an investor (like Abacus) who is responsible for all future premium payments and will collect the death benefit when the policy matures.
A life settlement is not a loan. It is a one-time transfer of money from an institutional investment fund to the insured in exchange for policy ownership. Once the cash is transferred, it belongs entirely to the policyholder. You will never be expected to pay back any portion of your policy.
