These days, more and more people seem to be cashing in their life insurance policies early by selling them on. It’s a great way of getting extra cash in your later years, but of course, then leaves you without insurance. If you’re reading this, we assume you’ve already considered selling your policy. So, let’s discuss the right way to get your insurance policy sold and you can decide if it’s right for you.
Why Sell?
It could seem like a confusing or risky move to sell your life insurance policy before you die. You won’t have any on-death payments to leave to your loved ones this way. But, sometimes that money is far more important to you and your loved ones now than it could ever be in the future. For example, if you develop complex and expensive medical needs in your later years, you may consider selling your policy to help cover these costs. Therefore, you would be saving your family money now, rather than paying them back upon your death. There are many situations like this where you may find yourself considering selling that policy.
Check If You Are Eligible
The first thing to do is make sure you are eligible. First, you should check if your state allows the sale of life insurance policies. As shown by this map, there are actually some jurisdictions where life insurance policies are not currently bought or sold by any licensed companies. Assuming you are in a licensed area, you also usually need to be over 65 and have a payout value of over $100,000 to be eligible to sell your policy. If this is the case, move on to the next step…
Find an Advisor
So, if you are in an eligible area and think you meet the criteria, the next best step is to reach out to an advisor. A professional financial advisor will be able to discuss the process with you and advise on whether they think this is a logical and practical move to make. They will be able to break down for you an expected sales cost and check it against any financial issues you are having.
Next, a Broker
Agreed to sell? OK! Next, you’ll need to check your area again to find out who the licensed insurance resellers are in your state. At this point, you can get yourself in contact with a broker and start the conversation about selling. The brokers will take all the details of your policy and its value. They will need quite a bit of information regarding your policy and its use over the years to ensure it is eligible for sale.
At this point, the brokers will likely be able to offer you an estimate on how much you could be looking at value-wise. As a general rule of thumb, you could receive anywhere from 10-35% of the value of your final payout as a cash offer for your policy. This varies massively on the age of the policy, your age, location, and much more.
Match With a Buyer
Next, the broker will find a suitable buyer for your policy. To do this they will offer it at its estimated value to an array of potential buyers, investors, or entities that may be interested in buying the policy. Hopefully, they will quickly match your policy to a suitable buyer and you’ll be able to start making plans to sell. Of course, you do not have to accept the initial offers that come through if you feel like your policy is worth more than you have been offered. There is room for negotiation at this stage of the process.
Sell Your Policy
Once negotiations are complete and you are happy with the valuation of your policy, you will agree on terms through the broker and begin the process of actually selling it. At this point, you will receive your agreed lump sum in exchange for the purchase of the insurance. The buyer becomes the policyholder, meaning they take on the premium payments and will receive any payouts or other benefits from the policy. You will have your agreed cash amount to do with whatever you see fit!
As you can see, the process of selling life insurance to a third party is actually quite easy. All you need to know is how much you are willing to sell for, then instruct a broker to do the rest for you. Hopefully, you can access much-needed cash when necessary and feel like you made the right decision with your insurance policy.