Many times when you reach a certain age, you realize that you may not need your insurance policy anymore. It can be because of many reasons; you may not be able to afford the premiums anymore, or you don’t have a use for it anymore. In situations like these, people sell their policies to a suitable buyer for cash. This can be used as an emergency fund in case an unexpected situation arises. This is also why you should look for a settlement agency.
How does the process work?
When you sell life insurance policy, the process of converting it into cash is possible, but it’s complicated. Firstly, you will have to carefully go through your plan and ensure that everything is up to date; this way, you can decide on the selling value. Secondly, you will have to get a buyer who is perfect for your insurance plan. Once that is sorted, you can negotiate a deal and receive the cash in return. Once the buyer accepts the proposal, he will be subject to any insurance premiums henceforth, and if you pass away, the benefits of your insurance plan will go the buyer.
It’s advised that you seek professional help when looking for a buyer and not do it yourself.
The whole process can be overwhelming to someone who is not familiar with it. You may be scammed, or you may not know what documents are required. When you take help from a professional, you’re guided through the process along with receiving the proper financial assistance. If you seek help from a settlement company, you will receive a part of your policy value in cash. If you go for a broker, you will have to pay him a commission which might be a large part of your settlement.
Main points you need to know to sell life insurance policy:
- It’s possible that when you put your plan up for sale, you may not get the price you desire because it wasn’t as valuable on the market, as you thought it was.
- You won’t get the full face value as well; reports formed by the US government in 2010 showed that sellers would receive 13 to 21% of their policy values.
- Brokers can charge a commission that goes up to 9%.
- A buyer can be picky with the policy he/she chooses. They are approached with many offers, but they are selective when it comes to choosing. Some buyers will specifically look out for policy owners who are over the age of 65, while some look for sellers who have a terminal illness. If you’re young and healthy, chances are your insurance plan won’t be very attractive to buyers.
- Insurance plans
- are subject to tax deductions.
- Selling your insurance is not the only option, you can take a loan against it, or speed the payout date. In some cases, policyholders sell the plan to family members. However, it would be best if you took some advice from your financial advisor.
How to sell life insurance policy?
When you do not need an insurance plan, then the idea of selling it is not that bad. If you decide to sell your policy, then listed below are the top points you can follow:
Know your policy rules.
This point is crucial because your insurance will have a statute that speaks about selling and the directions you will have to follow if you do decide to sell. If you don’t understand these rules, you can always take assistance from a qualified financial advisor. Also, if you’re choosing a settlement company to sell your policy and find a buyer, then it’s best that you ask the settlement agent for help.
Don’t jump on the first offer you receive:
Life insurance policies are famous for not having set values, and different buyers will have various suggestions for you. Sometimes, the good offers come a little later, so patience plays a big hand here; you need to wait it out and listen to all the suggestions that come your way. To select the first offer that comes your way is impatient and an unwise decision.
When selling your life insurance policy, always check that your massive debts have been cleared because if you have any outstanding debts, the amount will be deducted from the cash value. So, it’s better not to have any obligations. If you do have debts, then you must consult your financial advisor before you decide to sell off your insurance plan.