No one knows the future, so you want to do everything possible to secure your family if you’re not there tomorrow. And that’s why life insurance exists: to provide financial protection and an income to your beneficiaries in the event of your death.
That said, there may come a time when you just don’t need your life insurance anymore. For example, when your kids are all grown up, have jobs, and can care for their own needs. In other cases, the premiums may be too burdensome to continue paying. Whatever your reason, it’s possible to sell your life insurance instead of letting it lapse or settling for what your insurance is willing to pay you, which is usually lower.
A life settlement refers to selling a life insurance policy to another party for an agreed-upon one-off cash payment. The party then becomes the new beneficiary for your policy. Usually, this cash payment is higher than the surrender value (that is, what your carrier is willing to pay you to give up your policy) but lower than the death benefits.
So, exactly how should you go about selling your life insurance?
1. Find a Life Settlement Company
You have two options through which you can sell your life insurance. You either look for a broker who will act as the middleman in the transaction or sell directly to a life settlement company. The latter is easier, as you’re directly working with the buyer, and all proceeds come untouched. That said, ensure you go with a reputable company that’s licensed to operate.
2. Submit Relevant Records
Next, the company will ask you to submit your documentation to review your policy. Usually, you will need to provide your insurance as well as health records going back a few years. In most cases, the life settlement company will ask for authorization, rather than actual records, to request information from your carrier and healthcare providers. If you want to learn more about what you need, your settlement company should help.
3. Get a Policy Appraisal & Offer
Once the settlement company has all the documentation, they’ll determine how much your policy is actually worth. From these estimates, they’ll decide if the investment is worth it. They’ll table an offer if they determine that the policy is worthy of purchasing (and not a fraud). You can either accept or decline the offer, depending on what you’re looking for.
4. Close Sale
If you accept it, the life settlement provider will send closing documents to you so that you can go through them, sign off, and return them. Then, your carrier will be notified of the transfer, ownership will change, and you get your money.
A Life Settlement is the Best Option
If you no longer want to keep paying premiums on your life insurance or need a large sum of money, selling your life insurance will give you the best deal, as opposed to surrendering your policy. And with the right settlement company, you can get a great offer faster.