The Guide to Reverse Life Insurance



Reverse life insurance is the process of selling your life insurance to an investor for an upfront settlement. With the growing popularity of these insurance transactions, Ovid put together this quick and nifty reverse life insurance guide. Most people don’t realize they have this important hidden asset and that they can sell their life insurance just like their house or their car. Start with this article to figure out if it makes sense for you to get paid for your life insurance. If you’re looking for more information then, read this life settlement guide.


How Reverse Life Insurance Works

This transaction is another term for a “life settlement”, the sale of your policy to a 3rd party investor called a life settlement provider. The concept of “reversing” your life insurance means that instead of purchasing life insurance, you are selling it back to someone else. Almost all kinds of life insurance can be reversed, including individual policies, corporate-issued policies and key-man policies. The process is pretty simple: once you have received an offer that you like, you assign the ownership of your life insurance to the buyer (or the investor). You are then paid out the cash settlement offer and the investor owns your life insurance going forward. That means that the investor is responsible for paying the premium cost every year directly to the life insurance company, and the investor collects the death benefit when you pass away.

You need to make sure that credible buyers are bidding for your life insurance policy. A good way to do that is to get matched to the right buyers based on you and your policy profile and characteristics (different investors look for different kinds of policies). Ovid asks your a few questions and then instantly matches you to interested buyers based on how you answer. You can get matched here. Life settlement brokers also have relationships with large institutional buyers who purchase thousands of life insurance policies through reverse offerings but often charge a hefty commission. Only sell your policy to an institutional buyer, as your policy has very private and personal information on it. Ovid operates an online exchange where buyers bid for your life insurance in real time and you get all of the offers at no cost – the premier life settlement exchange in the market.



Quick Resources on Life Settlements

Calculate your Policy Value Policy Sale Process
Guide to Life Settlements Sell Your Life Insurance


The Benefits of a Life Settlement

Different people see different benefits to a life settlement transaction, depending on their personal situation. Generally, people pursue a life settlement when they no longer want it, need it or can afford their life insurance. Some people may just have an old life insurance policy that they no longer need – maybe your children are grown up and financially stable on their own. Maybe your spouse was the beneficiary and you outlived them. Or maybe you’d just rather get a large cash payment and use that money for something else, like helping a grandchild with college tuition or buying yourself a vacation home.

Another common case is that the policy seller has an underfunded retirement account – for which a reverse transaction can help fund. Reversing your life insurance can also help with the  common scenario of paying for medical costs – often cancer treatment or something similarly serious and expensive.

How much is your policy worth?


Who Qualifies to Sell Their Policy?

Generally, you must be 65 and older to be a candidate for selling your life insurance through this kind of reverse transaction. However, there is an exception – if you are diagnosed with a terminal condition and a life expectancy of three years or less, you might qualify for selling your life insurance. The policyholder must have a policy value of at least $100,000 in death benefit at minimum. There is no limit to the size of policy you can sell. Ovid has helped people obtain life settlement on policies as large as $5 million in death benefit and as small as $100,000 in death benefit.

Almost all kinds of insurance are able to be reversed, including Universal Life, Whole Life and Term Life. If you want to reverse your term life, that policy often must be convertible to whole or universal life. A non-convertible term life policy is often not reversible. The first step is for your life settlement buyer or broker to analyze your life insurance policy “illustration” a document which shows the premium costs going forward. Upon analysis, the buyer or broker should be able to tell if the policy has a positive value for purchasing, and if it’s likely that someone will buy it. You can learn more about who qualifies here.


The Life Settlement Process

The process for selling your life insurance is relatively straight-forward. First, you must be qualified by a buyer or broker. This is a quick process if you have you policy illustration handy. Next, the buyer or broker will work to obtain your medical records from your doctors (with your signed permission). Once the medical records have been retrieved, the buyer or broker will then run a life expectancy analysis based on your medical records. This is where it is important for you to disclose any serious illnesses or diseases that you might have as well as be honest about your medical history. Once the life expectancy is complete, if you’re working with a broker, they will solicit the policy to buyers and collect bids made. If working directly with buyers, you should manage the process yourself or with a financial advisor. The buyers will run calculations on what they think the policy is worth to them, based on their perception of your health, as well as their cost of capital. Once the bids have been made, you are able to select any offer you’d like (or select no offer at all). The process is entirely free up until this point. 

Then you enter the closing process to transact the policy. There are some forms to fill out and sign and the settlement offer goes into an escrow account that is visible by you. You then sign a transfer of ownership to make the buyer the new owner of the policy. Once the life insurance company processes the transaction, the money is released from escrow. You then have a number of days of “rescission” period (number of days depends on the state, often 15 days), to change you mind if you’d like.  After this recission period is expired, the policy officially belongs to the buyer.


How to Estimate Your Settlement Offer

The average person who sells their policy can get around 20% of the death benefit in cash settlement. So for example, if you have a $1M life insurance policy, you may be able to sell it for an average of $200,000 of cash in a reverse life insurance transaction. The easiest way to estimate what your policy might be worth in a life settlement is to use this Reverse Life Insurance Calculator. Just answer a few questions and get an estimate of your policy cash offer within a minute. The estimation process needs to know your policy amount, your age and a summary of your health.


About Ovid

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.