(3 minute read)
Depending on whether you’re an insurance agent or a life insurance policyholder “selling a life insurance policy” can mean different things. For an agent, it means doing their routine work—selling policies to clients. If you’re looking for that kind of information, this article’s not quite what you’re looking for.
This article refers to the second, lesser-known connotation: a transaction in which a policyholder works with a life settlement broker to sell a life insurance policy they no longer want or can no longer afford to a third party. The policyholder receives a cash payout, and the company that purchases the policy takes over paying the premiums and, in return, receives the policy’s death benefit when the original policyholder passes.
For many seniors, pursuing a life settlement is a savvy decision that can accommodate a change in lifestyle or priorities. But like any major financial decision, it’s important to think it through carefully. So, what are the pros and cons of selling a life insurance policy you don’t want or need anymore? Keep reading for the answers. First we’ll look at what you can gain—namely, the value of the cash payout—and then we’ll look at potential drawbacks. That way, you can make the best decision possible.
How Much Do You Make for Selling a Life Insurance Policy to a Life Settlement Provider?
By selling an unwanted policy to a life settlement provider, you’ll often receive around 20% of the policy’s death benefit—though the actual figure might be anywhere between 10 and 25%. That means if your policy is worth $150,000, you could receive as much as $37,500.
Some of the details that can impact a life settlement’s value include the policyholder’s remaining life expectancy and policy details (such as the annual premiums and death benefit amount)—as well as market factors (like the rate of return the policy’s buyer is seeking).
To some, that figure might not sound too impressive, but here’s something to put it into perspective. A life settlement is usually worth as much as four to seven times the amount you’d receive were you to just surrender the policy (or stop paying the premiums to let the policy lapse). You’re also immediately relieved of paying the monthly policy premium.
What Is the Hardest Part of Selling a Life Insurance Policy?
Selling a life insurance policy for cash is not a particularly complicated process—the most difficult part is probably deciding whether it’s the right move for you. So far, we’ve primarily addressed the potential benefits of a life settlement—the payout’s value. But we’ve also mentioned that life settlements aren’t going to be a perfect option in every situation, so let’s briefly explore that side of the equation by exploring the potential downside.
What Is the Risk of Selling a Life Insurance Policy for Cash?
Life settlements are significant transactions, and they’re not always going to represent the best option for a policyholder (underscoring the importance of consulting with a trusted financial advisor). As Kiplinger notes:
All too often, insurance experts say, seniors agree to life settlements without exploring alternatives that could bring far greater value to themselves or their beneficiaries.
Fortunately, this is an easy enough risk to mitigate—with the assistance of a trusted financial advisor or by partnering with a life settlement broker like LSA. By doing so, you can make sure that you get all of your questions answered and concerns addressed before entering into any formal agreement. Most importantly, you can receive expert insights into the pros and cons of selling your insurance policy, and ultimately make the best possible decision for yourself and your beneficiaries.
How Do You Successfully Sell a Life Insurance Policy?
If you have an eligible life insurance policy you no longer want or need, selling it for a cash payout isn’t terribly complicated. Here’s how to sell your life insurance policy, in 3 easy steps.
- See if your policy is eligible. Most policy types are, with the exception being term life policies (which only qualify if they are convertible). Our online qualification calculator is quick, easy, and free to use.
- If your policy qualifies, complete a life settlement application. You can download our application to submit your case to LSA. Once your application has been received, we’ll get to work reviewing your application, including the appropriate policy details and medical records. We’ll also work to find the best company to sell your life insurance policy to, based on what they’re willing to offer.
- Receive an offer. Now it’s your turn to be the one performing a review. You’ll want to consider it carefully, and ask your advisor to clarify anything you’re not sure about. If you choose to accept the offer, great! You’ll receive a closing packet, and once that’s complete, you can receive your payout.
Take the First Step Today, with LSA
We would love the opportunity to review your case. Our team has over 50+ years of combined experience in the field, and we’ll help you to understand every step of the process, from considering your eligibility to determining whether a life settlement is the right choice for you. Getting the process started takes less than a minute: check your eligibility or submit your case today. If you still have any questions, you can read our FAQs or contact us directly.
