How To Sell A Life Insurance Policy To A 3rd Party

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Can I Sell My Life Insurance Policy?

Yes, you can sell your life insurance policy through a transaction known as a viatical settlement or life settlement. In a life settlement, the policyholder sells their life insurance policy to a third party, often for more than the cash surrender value but less than the death benefit. The buyer takes over the premium payments and becomes the beneficiary of the policy, receiving the death benefit when the insured passes away. It’s a viable option for policyholders who no longer need or can’t afford their policy, though it’s crucial to consider the financial and tax implications of such a sale.

Key Takeaways:

  • Financial Need: Selling a life insurance policy can provide substantial liquidity, which may be helpful if you’re facing financial strain.
  • Policy Premiums: If your premiums are no longer affordable, selling your policy could be a suitable option.
  • Changes in Family Circumstances: You might consider selling if your beneficiaries no longer need the death benefit.

Steps to Sell Your Life Insurance Policy

  1. Evaluate Your Need: Determine why you want to sell your policy. Common reasons include financial hardship, no longer needing the policy, or the premiums becoming unaffordable.
  2. Check Policy Eligibility: Verify if your policy is eligible for sale. This typically requires a policy with a death benefit of at least $100,000.
  3. Assess Your Health Status: Your current health condition can significantly impact the value of your policy in a life settlement.
  4. Get a Professional Appraisal: Consult with a financial advisor or a life settlement broker to get an appraisal of your policy’s value.
  5. Choose a Reputable Buyer: Look for licensed life settlement providers or brokers. They will offer different bids for your policy.
  6. Understand the Tax Implications: Be aware that the cash received from selling your policy may be subject to income tax.
  7. Complete the Transaction: After accepting an offer, complete the necessary paperwork to transfer ownership of the policy to the buyer.

Related Reading: Can You Sell Your Indexed Universal Life Insurance (IUL)?

Can I Sell My Life Insurance Policy?

Comparing Options for Selling Your Life Insurance

OptionProsConsBest For
Direct Sale to a CompanyQuick process, no broker feesPotentially lower offersThose seeking a fast settlement
Using a BrokerCompetitive bids, professional assistanceBroker feesThose seeking the highest possible offer
Life Settlement FundsDiverse investment, potential for higher returnsComplexity, higher riskInvestors looking for alternatives to traditional investments

Related Reading: How to Sell Your Jefferson Pilot Life Insurance Policy

Sell Life Insurance Policy

Conclusion

Selling your life insurance policy to a third party can provide immediate financial relief or funds for other needs. It’s important to understand the process, assess your situation, and consult with professionals to make an informed decision. Remember, this decision should align with your overall financial goals and needs.

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Frequently Asked Questions

Do you have to be 65 to sell your life insurance policy?

No, you don’t have to be 65 to sell your policy. You can sell your policy at any age, but you must meet the requirements to sell your policy.

Do companies buy life insurance policies?

Yes, companies do buy policies. However, they will usually only purchase policies with high death benefits.

Can you sell a life insurance policy that is not paid up?

Yes, you can sell an insurance policy that is not paid up. However, the policy must be in good standing to be sold.

What are the fees associated with selling a life insurance policy?

The fees associated with selling a policy vary depending on the buyer. Some buyers may charge an upfront fee, while. In addition, the policy must be in good standing to be sold.

Is selling a life insurance policy taxable?

The government (IRS) will tax any gain from selling your life insurance policy.

Can you sell your life insurance policy if you are under 65?

You can sell your policy if you are under 65 or in bad health. The sale of the policy will not be affected by your age.

Can I sell my term life insurance policy?

Yes, you can sell your term life insurance policy if the policy is convertible to a permanent life insurance policy. However, the policy must be in good standing to be sold.

Where can I sell my life insurance policy?

Online brokers like The Annuity Expert or contacting life insurance companies directly.

How much can I sell my life insurance for?

The amount you can sell your policy will depend on the death benefit, policy type, and age. Generally, you can anticipate receiving between 50% and 80% of your policy’s death benefit, with the remainder paid to the buyer for their commission.

What are the requirements to sell my life insurance policy?

To sell your policy, you must be the policy owner and be in good standing. In addition, you must complete an application and submit it to the buyer.

How do I know if I can sell my life insurance policy?

To be eligible to sell your policy, you must be the policy’s owner, and it must be in good standing. In addition, the seller must be in poor health, the proceeds must be greater than $100,000 and have a permanent or convertible term policy.

What is the difference between selling my life insurance policy and surrendering my life insurance policy?

When you sell your policy, you receive a lump sum of cash. Likewise, when you surrender your policy, you receive the policy’s cash surrender value.

What is the closing process of selling my life insurance policy?

The life settlement process of selling your life insurance begins with finding a life settlement company for your policy. Once you have found an interested buyer, you will complete a life insurance application and submit it to the buyer. The buyer will then review the application and make an offer. If you accept the offer, the buyer pays you the agreed-upon amount and takes over the policy.

What are my options if I am not eligible to sell my life insurance policy?

If you are not eligible to sell your policy, you may be able to surrender the policy for its cash value or borrow against the policy.

What is the downside of selling your life insurance policy?

The downside of selling your life policy is that you will no longer have coverage. In addition, the sale of the policy may trigger a taxable event.

What kind of life insurance can be sold?

Most policies can be sold, including whole life, convertible term life, and a universal life policy. However, the policy must be in good standing to be sold.

What is the best age to sell a life insurance policy?

The best age to sell a policy is typically between 60 and 70. This is because older policies tend to have a higher death benefit and are less likely to lapse.

Do I get my money back if I cancel my life insurance?

If you have permanent life insurance, you may be able to get some of your money back if you cancel your policy. This is because permanent life insurance policies have a cash value that grows over time. However, you will not get all your money back, as the insurance carrier will keep the fees charged when you originally purchased the policy.

Do I get my money back if I cancel my term life insurance?

You will not receive any money back if you cancel your term life policy. This is because term policies do not have a cash value component. However, if you have a convertible term life insurance policy, you may be able to sell it for a lump sum of cash.

Can you cash out a life insurance policy before death?

If you need cash and own a policy, you may be able to borrow against the policy or sell it for a lump sum of cash. However, if you surrender your life insurance policy, you will only receive the policy’s cash value.

Who can I sell my policy to?

Most life insurance policies can be sold to third-party buyers, such as viatical settlement companies.

Can I sell my life insurance policy if I am not terminally ill?

You must be 65 years or older to sell your life insurance policy. However, some life insurance policies can be sold before this age if the policyholder faces significant financial hardship.

What does it mean to sell your life insurance policy?

When you sell your life insurance policy, you essentially sell the death benefit to a third party. The third party will then pay you as specified in the contract.

How much will I get if I sell my $100,000 term life insurance policy?

The amount you will receive for your life insurance policy will depend on several factors, such as the type of policy, the death benefit, and the age and health of the policyholder. However, you can expect between $20,000 and $80,000 of the $100,000 death benefit.

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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