If you are just new to life insurance, then you should know what we call by sell life insurance policies for cash. In the world of life insurance, selling a policy is one of the major financial decisions. Everyone who are expecting to sell his/her insurance policies basically needs to consider evaluating the benefits included in the insurance and the alternative choices provided by the life insurance companies.
If you have already confirmed to purchase a life insurance policy and wanted to sell it soon, one primary things you should do is to contact the Connecticut Insurance Department as it is always possible that you are targeted to get involved in insurance fraud.
In this regards, the Connecticut Insurance Department and the National Association of Insurance Commissioners highly concern if the consumers may not comprehensively understand the effects of selling their life insurance policies.
Hence, the following review will provide you with everything about selling life insurance policies for cash.
Categories of Insurance Policy Sales
There are two main categories of insurance policy sales. Those are life settlements and viatical settlements. These two types of insurance policy sales are different from each other due to the fact that a life settlement sale is available for a healthy insured while the viatical settlement sale is available for insured that suffers from a terminal illness.
Here are the detailed explanation of each sales category:
A life settlement is a life insurance policy sale sold to a third party. If you want to sell your insurance policy with this category, you will get cash and the buyer will be the new policy owner. This new owner is required to pay all of the future premiums and get the whole death benefits when he/she dies.
There are many reasons why healthy people tend to sell their life insurance policies. First, they have some changes on their financial needs. Second, they want to decrease the premium payments that they should pay. Third, they probably need a cash for other expenses.
Life insurance policies can be sold directly to a company through a broker who works for you. They can also be sold through “comparison shops” for either life or viatical settlement offers. This way, the broker can get commissions from the buyer when the sale is successfully completed.
Viatical settlement is the second life insurance policy sale for cash you can try. This category lets you sell life insurance policy due to the terminal illness you have. This sale is expected to help provide cash so the policyholder can met his/her immediate medical and living expenses.
Similar to life settlement, the viatical settlement involve the life insurance sale to a third party. The new owner will be the new policyholder or even beneficiaries of a life insurance policy. he/she must pay all of the future premiums as well as get the death benefit when you pass away.
Other Options Instead of Selling Your Life Insurance
While selling a life insurance policies is not an appropriate option you may take, there are still two options you can consider taking out. First, use your policy cash value and second, use your accelerated death benefits provision. If you have a whole life insurance policy or a policy that comes with an investment feature, you can ask to obtain a loan against its cash value. This will help you meet your immediate expenses and keep your policy for your beneficiaries.
The cash value can also be used as a security for a loan from a financial institution. Now if your life insurance policy has an accelerated death benefit provision and could pay a certain portion of your death benefit, well, you don’t have to sell your life insurance policy.
What To Consider Before Selling Life Insurance Policies for Cash
There are several things to consider before you finally decide to sell life insurance policies for cash. First, you had better contact a tax advisor and find out whether the tax has implications or not. This is because the proceeds from the sale can be taxed. Second, decide whether you stand to lose public assistance or Medicaid if you accept your cash settlement. Third, get to know better what things are required to fulfil dealing with medical and personal information to your policy purchaser.
How To Sell Life Insurance Policies
As we have mentioned earlier, there are two categories to choose if you want to sell your life insurance for cash. Those are life settlement and viatical settlement. The process of selling life insurance policies involves the policy exchange to a third party investor which will be responsible to pay the future premiums, pay the down debt, go on vacation and pay the retirement expenses. Once the life insurance is sold, the purchaser will be responsible for payments through your life insurance company remainder. When you pass away, the new owner or policyholder will receive your death benefits.
In selling life insurance policy process, life settlement is not only complex but also overwhelming. This is based on the information sourced from people that used to sell their life insurance through life settlement. Therefore, it is advised that you work with an experienced third party like Harbor Life Settlements to guide you to get a fair value when selling your life insurance policies.
However, before starting the process, you’ll need to determine whether you would like to work with a broker or provider.
Selling Life Insurance Policy with A Broker
A broker is a third party either company or individual who will represent you in the process of selling life insurance policies through life settlement. When you work with a broker, they will go to get the buyers and get as many offers as possible to drive up the price. So you can have a higher value.
In this regards, Harbor Life Brokerage is considered having the world’s most advanced online settlement auction platform that they use to invite more purchasers and sellers. The traditional process of life settlement is slow and wasting time, however, the Harbor Life Brokerage applies the revolutionary online exchange methods. As a result, there are lots of buyers with higher number of offers and value for your life insurance policies.
Selling Life Insurance Policy with A Provider
A provider is the company or investor that makes an offer over the policy and purchase it. The main objective of a provider here is to purchase your life insurance policies in the most affordable price so that they can get more profit. To sell policies, you can directly work with them but you will only have a single offer that can limit your potential value.
Requirements To Sell Your Life Insurance Policy
To sell life insurance policies for cash, you’ll need to decide who you will work with, a brokerage of a provider. Then, provide your basic information including your name, age, health and insurance policy. This is aimed to see whether you meet the requirement to sell life insurance policy. Usually, this process can be done online or on the phone while the detail information will be asked later for eligibility verification.
The qualifying factors for selling life insurance policy are:
- Types of policy
Not all types of policy can be on sale. For life settlement, you must have a whole, variable, convertible term and universal life policy.
- Value of policy
Most cases proved that the face value of your policy should be at least $50,000 to qualify for a life settlement.
- Age of Policy Owner
The age qualifying for life settlement is usually 70 years old or older. This way, the older the person is, the more valuable the life settlement will be.
- Age of Policy
For life settlement, the policy period should be between 2-5 years before you sell it. However, the age of policy can vary depending on the states regulations.
If you qualify these requirements, well, you’ll be likely eligible for life settlement. However, you may also qualify for viatical settlement if you were currently diagnosed with a terminal illness. Thus, no matter if you don’t meet the life settlement qualification, you can have it with viatical settlement.
Steps On How To Sell Your Life Insurance Policies
Once you decide on who you’ll work with to sell your policies, follow the steps below to start the process:
- Submit Medical and Insurance Records, or Provide Authorization
Submitting medical and insurance records usually requires to provide general information to verify the eligibility for life or viatical settlement. In some cases, you may be eligible for the submission process, however, the partner can ask you to provide authorization in order that your future purchase will get information directly from the insurance company and healthcare provider.
- Go Through Underwriting Process
The second step you must carry out is to go through the underwriting process. This process usually consists of information evaluation to calculate the life expectancy and predict the policy’s value.
- Find Interested Purchasers
At this step, the partner you work with, either a broker or a provider, will search for one or more investors that will be interested in purchasing your life insurance policy. If you are working with a provider, you will be usually sent notification whether or not he/she gets a future purchaser.
- Look For and Negotiate Offers
Once you find someone that is interested to purchase your life insurance policy, the next step is to look for the offers and negotiate them. At this stage, the future purchaser will submit an offer for the policy. You, as a policyholder, determine whether to accept or reject the offer. Do negotiation until the price is agreed upon.
- Exchange Ownership
In this step, the purchaser gives the policyholder a lump cash sum and takes over the ownership of life insurance policy.
- Purchaser Pays The Premiums and Maintenance Fees
Next, the purchaser will pay the premiums and other fees of maintenance through the remainder of the original policyholder.
- Purchaser Receives Death Benefits When The Original Policyholder Passes Away
The last step, the purchaser will receive the death benefits when the original policyholder passes away. In this case, the purchaser will receive it directly from the insurance company.
Pros and Cons of Selling Life Insurance Policy
Positively, selling a life insurance policy will allow you to receive a large cash that you can use for your immediate expenses. You can also recoup your money instead of letting in insurance and getting nothing. Further, selling life insurance policy will let you to get more money than you would receive from the insurance company. One more, you will have no more responsibility to pay the premiums.
Negatively, selling life insurance policy makes your beneficiaries unable to receive the death benefit. You would also be required to pay taxes depending on the details of your life settlement. Later, the brokers and life settlement companies will take charge and commissions for their work with you. And last, accepting a life settlement may cause you disqualify for finance assistance types.
Overall, it can be either good or bad to sell life insurance policies for cash depending on what you need and the reasons underlying your decision.