Can you sell your term life insurance policy? Selling a term life policy cannot be done in every situation but it belongs to a better idea than canceling the coverage. Nonetheless, converting term life to permanent life (whole life policy) is more recommended than both.
When want to sell term life insurance, the policyholders should understand how to sell it. Recognizing the pros and cons of selling term life policy is also important pretty they can consider their intention first. The most important thing is to make sure your decision is for the right reason.
Contents
Recognizing Term Life Policy
A Term life insurance or pure life insurance is a policy with a specific length of time and guaranteed death benefit payment during that period. The coverage and premium payment are available in 10 to 30 years or until you reach a specific age. Commonly, the term life insurance ends when the policyholders reach 80 years old.
Meanwhile, the term life insurance is designed to protect the beneficiaries financially after the insured dies. The coverage cost is useful to cover some expenses like final obligations, debts, and medical bills, until your funeral costs.
When deciding to purchase a term life policy, the insurer will introduce the types of policy. You may buy a level-term of policy with some features of the same benefits paid in a specific time and the same premium costs for a designated period.
Or you purchase a decreasing-term life policy with some features of decreasing death benefit amount over the contract term. The equal premium cost in most coverage periods but it may be deducted. It is usually provided to pay a mortgage and other types of expenses.
Can you sell your term life insurance policy? Yes, you can but you should understand how it works. The term life policy works by paying the death benefit to beneficiaries when the policyholder dies within the period. However, the beneficiaries will not get it if the policyholder still outlives when the contract ends.
Besides death benefits, the term life policy forces the policyholder to pay premiums based on the requirements. Someone becomes a policyholder when he or she qualifies for the requirement based on age, health, and life expectancy.
Why Do You Buy And Then Sell Your Term Life Insurance?
Someone buys life insurance both term and permanent policies, of course, have a specific reason. Typically, the applicants or policyholders purchase life insurance as a form of future financial solution for their family when they die in the period. The life insurance will give a death benefit paid by the insurer to their families or called beneficiaries.
Later on, the death benefit can be used for covering some expenses such as burial costs, medical costs, obligations, and retirement, until income replacement. However, those coverage types keep is based on the term life policy chosen and the insurer. The life insurance policy also often gives additional coverage called available riders.
Depending on permanent life, purchasing term life insurance may be a good idea if your primary goal is to give financial protection affordably. The term life insurance covers the cost of your final expenses and it can cover your financial obligation after your death. Even, the death benefit does not have a cash value.
The term life policy is offered at low premium rates but the beneficiaries will get high benefit amounts. People can utilize their term life policy to invest or estate planning tools without interest. Additionally, the policyholders may take out the term life policy as a loan source to pay for their kid’s college education.
Why do you should sell it and can you sell your term life insurance policy? The policyholders may sell their term life policy in certain situations such as:
Need cash quickly
Selling term life insurance, it turns out, becomes a good option when you need cash quickly. It will be a smart move for you but do not sell without having the right reason.
The insurer will put some of your money back and relieve the monthly payments if you sell your term life insurance policy. Even, life settlements typically give a larger payout than surrendering or canceling your term life policy.
Cover A Sizable Emergency Cost
You might sell your term life policy when you have to cover a sizable emergency cost. According to your condition, the insurer may pay more money from your policy. Covering a sizable emergency cost will be a reasonable reason when you are diagnosed with a terminal illness.
The death benefit can be taken out to cover your treatment and medical bills. Besides that, you can use the terminal illness rider on the term life policy to cover your emergency costs.
Last Option to Pay Medical Expenses
Different from covering the emergency cost, medical expenses are not only about the terminal illness. It will be the last option to sell your term life policy if your medical expenses need a lot of money.
So, you cannot pay your premium cost again and should take the surrender value and give up your policy. However, you can delay selling your policy if you have an accelerated death benefit. The insurer will recommend you claim the money to help pay for treatment and palliative care.
How To Sell Term Life Insurance Policy
Can you sell your term life insurance policy and how do you sell it? You can sell your term life policy through a life settlement for getting a one-time cash payment. When you sell your policy, search for an investor who wants to buy your policy to add to his or her portfolio.
Investors typically look for sellers aged over 65 with a limited life expectancy. It is as if they will get the death benefit when the seller or you die. Some investors are interested to purchase high-value policies and the term life policy may be lower than the universal life policy.
Ensure your term life policy has total value and the insurer’s rating is “A” or excellent. Find a broker or a life insurance settlement company to sell your term life policy.
They will act as the middle man to find a potential investor and help the transaction. Nevertheless, you might not get the full value of the selling price as brokers and settlement companies to charge a fee.
5 Tips Of Selling Term Life Insurance Policy
Selling the term life policy is not easy and it is often difficult to find a suitable investor. But, you can maximize your payout by following 5 tips to keep in mind:
Understand The Process
Selling a life insurance policy is somewhat complicated, so you have to truly get knee-deep in the process. Understanding how it works by knowing what to expect, selling rules and regulations, your cash value, your type of policy, and how much your coverage.
Hiring An Independent Advisor
An independent advisor is an expert on life insurance settlement and they can access your policy’s value. They can offer an appraisal of your life insurance and tell you about its features. By hiring an independent advisor, you may add value, help fill in the gaps, and get good brokers.
Discover A Reputable Broker
Can you sell your term life insurance policy by hiring a broker? Yes, of course, and it is a brilliant idea so your selling process is not complicated. Find the right broker by interviewing several brokers. Ask for some questions related to their competence, licensee, commission, negotiation, until discount.
However, you should be careful with your broker as they can take up your profits. Pay attention to the transaction costs as some brokers can charge 5% to 15% or 30% to 50% of the gross policy price.
Get Multiple Offers
Equal to buying term life insurance, you must get multiple offers to sell your term life policy. Your offer may vary widely and one offer can get double or triple by another insurer. Waiting for a good offer and allow the first one to pass it better as it might not be the last.
Round-Up Your Paperwork
Your broker will give a copy of your term life insurance policy to the potential buyers but buyers want to check your medical record to gauge the value of your policy. Therefore, round up your paperwork as these records can cost a few hundred dollars.
Pros And Cons Of Selling Term Life Insurance Policy
Can you sell your term life insurance policy? Yes, but there are some pros and cons of selling term life policy to know such as below:
Pros
Selling a life insurance policy can be a good move to make a life settlement. It is primarily because you need cash for your living expenses or the policy is no longer needed or affordable.
You need money to pay your medical bills, cover long-term care costs, or boost your retirement savings. Selling term life insurance can be done to make a viatical settlement. It is a term for getting cash to cover your terminal illness or life-threatening illness treatment.
Cons
Getting cash by selling the term life insurance is not the best option in every situation. You may use your policy rider to pay for your care and you still can save a portion for your beneficiaries.
Converting your term life policy to a permanent policy as you do not have a survivor will be a better option than selling your policy. Moreover, selling a permanent life policy is more potential to save your retirement or cover your long-term medical care expenses.
Alternatives To Selling Your Life Insurance Policy
Can you sell a term life insurance policy? Consider your decision before selling your term life policy. The following points can be used to consider:
- Accelerating the term: It may be possible to claim your term life insurance cash when you are still alive. But, it depends upon the insurer and your type of policy.
- Taking a loan against the policy’s cash value: If you have a permanent life insurance policy, you can borrow money from your total value with monthly interest. Surely, it assists to pay back the amount lent to you.
- Surrendering the policy: This way eases getting some cash quickly in the form of the surrender value though is not in a lot of money.
- Taking a personal loan: Getting a personal loan from your bank might ask for interest to pay but it is an easier alternative in most cases.
Final Words
Selling term life insurance needs the right reason to do it as it cannot be done in every situation. It is so essential to consider your decision to sell your policy by recognizing the term life policy, the reason to buy and sell, and the pros and cons.
Think about alternative ways before selling your insurance. Can you sell your term life insurance policy? Yes, of course, but find the tips to sell and learn how to sell your term life insurance properly.
