Funding retirement can be tricky. As people live longer every day, the cost of retirement continues to rise. Selling your existing life insurance could be a potential solution.
The process of selling your whole life insurance policy to a group of investors is called a life settlement. Many people who own insurance policies they no longer want or need aren’t aware that they have more lucrative options than taking the cash value of the policy or letting it lapse.
A whole life insurance policy has two parts. The insurance portion of the policy pays a predetermined amount of money to the policy holder’s named beneficiaries upon the insured person’s death. The investment portion of the policy builds cash value over time. The policy holder can borrow against that cash value or withdraw it.
Most people who own a whole life insurance policy understand that as long as they make on-time premium payments, they have the option to keep their policy in force, so their beneficiaries can eventually have the payout. They can also surrender it back to the insurance company for its cash value.
In cases where the beneficiaries no longer need the payout upon the death of the insured person, keeping the policy in force isn’t necessary. The cost of maintaining the policy may be unjustifiable in this situation.
Selling your life insurance is a one to three month process.
Here’s the criteria that will help you answer the question, “can I sell my whole life insurance policy?”
The insured person is over the age of 70
Healthy policy holders who are at least 65 may be eligible to sell their life insurance policy through a life settlement, even if they are in good health. The outcome depends on many factors, including the face value of the policy and the cost to maintain the premiums.
The whole life insurance policy has a face value of over $100,000
Universal life, convertible term life, and whole life insurance policies all work in a life settlement scenario. In most cases, the policy’s face value should be a minimum of $100,000. Larger policies are potentially worth more money to the policy holder in a life settlement.
Premium payments are current
Unlike auto or health insurance, missing a monthly life insurance policy doesn’t necessarily mean the policy is lapsed. A lapse in coverage only occurs when the life insurance policy’s grace period has run out. This is typically 30 days past the due date. If the policy premiums haven’t been paid for up to six months, reinstatement may still be an option. In any case, before any life insurance policy can be sold through a life settlement, the premium payments must be current.
The life insurance company is financially stable and has good rating in the marketplace
Investors prefer to purchase life insurance policies owned by companies that are financially stable and highly rated. These policies present less of an overall risk to investors. A policy issued by a quality company is worth more money in a life settlement situation.
The insured person is a citizen of the United States who resides here, as well
Countries other that the United States have varying regulations about the sale of life insurance policies through life settlement. In Canada, the practice is illegal in most provinces. A licensed representative of the investor that purchases the policy must be able to reach the former policy holder several times each year to get a health status update. This helps them make financial projections. It’s much simpler to find and contact people who reside in the United States full time.
Can I sell my whole life insurance policy if I have bad credit?
Some people who are interested in a life settlement worry that their financial situation could prevent them from participating in this process. Bad credit, a low net worth, or high levels of debt aren’t details that life settlement investors take into consideration.
Many people who want to sell their life insurance policies do so because of financial needs. Rising healthcare and long-term care insurance costs create a need that some peoples’ investments and retirement funds can’t cover.
How you plan to use the money has no affect on how much a life insurance policy is worth to an investor. Age or health status, policy type, and policy size are the main determining factors in every life settlement.
Can I sell my whole life insurance policy if I simply don’t need it anymore?
For many policy owners, their whole life insurance policy is more valuable while they are alive; especially if protecting the financial stability of a young family from the devastating effects of losing a parent is no longer an issue.
A life settlement nets the policy holder more money than the policy’s cash value. Even after the policy holder pays all the applicable fees and taxes on the amount of the payout the exceeds their cumulative premium payments, the life settlement is a better deal than taking the cash value of the policy.
Can I sell my whole life insurance policy safely?
The life settlement industry is better regulated now than in the past, with about 90% of the population in the United States protected by laws and regulations to protect the consumer. A common theme in these regulations is transparency. Most states require companies involved in the life settlement process to provide consumers with all offers and counteroffers. They also must make consumers aware of alternatives to selling their life insurance policies. In the majority of states, life settlement companies must follow all state and federal privacy laws.
In six states, laws require insurers to give senior policy owners facing surrender of lapse of their policies written notice that outline alternatives, including life settlements.
It’s important that seniors considering a life settlement research the specific laws governing the process in their home state. 31 states have a mandatory waiting period of two years before a policy owner can complete the life settlement process. In 11 states, the waiting period is five years. Many states that impose waiting periods make exceptions if applicants meet certain criteria like chronic or terminal illness, retirement, or divorce.
Getting an estimate of what your whole life insurance policy may be worth in a life settlement is easy with this quick life settlement calculator.
Ovid is a life settlement exchange. We instantly match you with institutional buyers who are interested in your policy, based on you and your policy profile. Getting an offer for your policy from Ovid buyer partners is completely free. If you do want so sell your policy, Ovid has proven to help obtain average payouts above the industry average. We’re based in San Francisco and have been featured in Forbes, US News, Business Insider for the incredible work we do for consumers. You can learn more about Ovid here.