Selling your life insurance policy can be a great way to supplement your retirement income. Not only do you rid yourself of burdensome premium payments, but you also gain a hefty payout to spend however you want. But before you start researching life settlement companies to sell to, there are a few questions to keep in mind.
- Are you selling for the right reasons?
- Are you qualified to pursue a life settlement?
- Have you considered the pros and cons of selling a life insurance policy?
- How do you find the best companies that buy life insurance policies?
In this blog, we’ll go over everything you need to consider when determining if selling your policy will be beneficial for you.
Why Would You Want To Sell Your Life Insurance Policy?
Before you sell your policy, make sure you are selling for the right reasons. Here are two good reasons to get rid of your life insurance:
- The Premiums are Too Expensive | Life insurance premiums aren’t cheap. When you are living on a fixed income, your money is likely better spent elsewhere. Once you sell your policy, you’re no longer responsible for paying premiums, meaning less money comes out of your pockets each month.
- You Need Cash For a Large Expense | If you need extra money for a medical bill or another large expense, selling your life insurance can help you cover the bill. Selling your life insurance will give you a significant one-time lump sum cash payout. Although the exact amount differs depending on your situation, typical life settlement payouts are 20% of your policy size, but the range could be anywhere from 10% to 25%+.
What Qualifies You To Sell Your Life Insurance Policy?
Not everyone is eligible for a life settlement. Here’s what you need to qualify:
- You Need To Be the Right Age | Typically you need to be over 65 years old to qualify for a life settlement. If you have certain medical conditions, you may be able to qualify if you are younger than 65.
- You Need to Have a Specific Life Expectancy | In general, you need to have experienced a recent negative change in health and have an estimated life expectancy of less than 15 years to qualify for a life settlement.
- You Need To Have the Right Insurance | Most life insurance policies are able to be sold. The following types of policies are all eligible for a life settlement:
- Term Life
- Convertible Term Life
- Survivorship Universal Life
- Survivorship Whole Life
- Whole Life
- Universal Life
- You Need To Have The Right Death Benefit | Your policy must have a death benefit of at least $100,000 to qualify for a life settlement.
- Your Policy Premiums Can’t Be Too High | Most often, your premiums should be less than 5% of your policy’s face value.
- Your Policy Can’t Be Too New | Your policy must be at least two years old in order to be sold. However, certain states require your policy to be active longer in order to sell.
If you want to check if you qualify now, use our sell my life insurance policy calculator.
Is It a Good Idea To Sell Your Life Insurance Policy?
Before you jump to sell, make sure you consider two things: debt and dependents. If you have incurred a significant amount of debt, selling your life insurance policy probably is not the best financial decision. After you pass, your beneficiaries have the ability to use your life insurance death benefit to pay off your debt. Even if you do not have a lot of debt, your beneficiaries may still need your death benefit if they currently rely on you for care and support.
However, if you do not have a significant amount of debt and if your dependents are thriving on their own, you are in a good position to sell! Additionally, it is best to consult your financial advisor before committing to a life settlement, as this will help ensure you get the most beneficial outcome.
How Do You Find the Right Life Settlement Provider?
When selling your life insurance policy, it’s important to work with the right people. Working with life settlement brokers, like Life Settlement Advisors, ensures you get the best deal possible. A broker works in the best interest of their clients and is committed to finding the best buyer for your policy. To support you, a broker will:
- Source deals with life settlement providers
- Help you understand the underwriting process
- Create a proper life settlement contract
- Handle negotiations with providers
If you’re ready to begin the life settlement process with a qualified and trusted partner, consider working with Life Settlement Advisors. With over 50+ years of experience, we know the life settlement industry inside and out. Connect with us today to learn more!
