A Guide to Selling Your Life Insurance

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Most times, when you reach a certain age, there’s not much use in keeping an insurance policy. There may be various reasons for this situation. Either you can no longer afford it, or you don’t see the need for it anymore. In times like these, you may think, “how to sell life insurance?”. Well, you will have to cash the policy. Usually, people sell the policies to life settlement agencies, so that a third party can use it and you can still come out with cash in hand.

How does it work?

When you think about, “how to sell life insurance?”, the process to convert policy into cash can be tedious. Firstly, you will have to get your insurance examined by a professional to determine what the face value will be, that is, the selling price. Once you get that sorted, the next step is to find yourself a capable buyer. When you settle on the buyer, a cash settlement will be negotiated, and you will receive it once the transaction goes through. Finally, the buyer is now in possession of your former insurance policy, and he/she will be allowed to collect the benefits when you pass away.

It’s advised that when looking for a buyer, you should take help from a professional. This is because if you go out looking for a buyer on your own, you will get overwhelmed and give up on the decision to sell all together. A settlement company or a broker are great options to find a suitable buyer. If you choose a settlement company, you will receive a percentage of your cash value. If you sell to a broker, you will have to pay him/her a commission. Either way, they will get you the buyer you want.

What do you need to know?

Here are a few points you need to consider before you decide on selling your life insurance policy:

>> Even if you assume it does, your life insurance doesn’t have much value in the market.

>> You won’t necessarily receive the whole face value. Reports from 2010 showed that sellers only received 13% to 21% of the total amount of their policies.

>> Brokers can charge up to 9% commission.

>> Your policy settlement may be subjected to income tax.

>> Brokerage and settlement aren’t the only options when you want to sell your policy for cash. Other options, like taking a loan against the policy, speeding the payout date so that it comes early, or in some cases, the policyholder has sold his/her insurance to a family member. Regardless of the option you choose, it would help if you were sure that what you’re doing is the right decision. It would be best if you spoke to your financial advisor before you decide your selling option.

How to sell life insurance?

Selling your life insurance policy is not a bad idea, especially since you don’t need it anymore, or if you can’t afford to pay the premiums anymore. If you intend on selling your policy, here are some of the steps you can follow to get cash back.

>> Understand the rules clearly: Before you decide to sell your policy, you need to read it carefully. The policy will state some rules about selling, and your state laws will regulate these rules. If you don’t understand the rules, you can ask your settlement agent or financial advisor to help you out. Either way, you need to ensure that you comprehend the rules.

>> Avoid bagging the first offer: You will receive offers from buyers that differ from each other. Review some suggestions before you choose one, don’t go for the first offer you get. Chances are there will be better ones out there, and you have to be patient and find the right one.

>> Take advise from an expert: It’s essential that you consult a financial or settlement expert before you go forth with your plan. This way, you will be aware of the tax deductions and any other changes you may face in the selling process.

>> Check to see if you have any debts: If you have any massive debts that need to be cleared, then the creditors can claim any cash you may get when you settle the policy. Hence, before you settle your policy, clear off all your debts.