Life insurance policies differ from policy owner to policy owner, because they’re designed to fit policy owners’ unique health and financial circumstances. Some policies allow owners to borrow on life insurance to receive untaxed funds, cancel their insurance coverage for a lump sum of cash accumulated from the policy, and/or cash out their policies.
According to the U.S. Securities and Exchange Commission (SEC), a life insurance policy is a contract between an insurance company and an insured person, the policy owner, designed to ensure that any beneficiaries of the policy owner will be financially taken care of upon the policy owner’s death. The owners make payments on the policy and, upon their death, their beneficiaries receive a payment, the death benefit, from the insurance company.
Selling a life insurance policy could be as financially beneficial as buying one. Policy owners may decide to sell their life insurance policies for a variety of reasons: to pay off debts, because the life insurance policy is no longer necessary, or simply to acquire extra money.
Policy owners can sell their life insurance policies to life insurance settlement companies, companies that make offers on and buy policies for sale.
A life settlement is the agreed-upon sale of a life insurance policy in exchange for a lump-sum cash payment. The buyer of the policy becomes responsible for paying the premiums on the policy and becomes the recipient of the payout of the policy from the life insurance company upon the death of the insured.
According to the Life Insurance Settlement Association, the life settlement market pursues the goal of upholding policy owners’ right to assign ownership of their life insurance policy, and allowing policy owners to receive monetary benefits from policies that are no longer affordable or necessary.
The life settlement market stems from the U.S. Supreme Court case of Grigsby v. Russell (1911), in which it was ruled that life insurance policy owners have the right to allow other parties, related or unrelated, to buy and assume ownership of their life insurance policies.
The life settlement process can depend on various factors: age, health status, access to long-term care, the ability to afford to pay on life insurance policies, and the finances of a life insurance policy owner. Life insurance policy owners are required to be at least 70 years old, with a policy worth $100,000 to sell a life insurance policy if they are without a life-threatening illness. Policy owners under 70 years old may be qualified for a viatical settlement if they have a life-threatening illness. A viatical settlement is a life insurance selling option similar to a life settlement, but designed for policy owners in poorer health.
Sell My Life Insurance Policy helps owners determine whether they are qualified to sell a qualifying life insurance policy and connects insured individuals to companies who buy life insurance policies. Through Sell My Life Insurance Policy, companies interested in purchasing life insurance policies are given information provided by the policy owner and use this information to contact the policy owner to make an offer for the policy.
When planning to sell a life insurance policy, policy owners need to know their medical history, what kind of insurance coverage they have, how long the premiums would need to be paid for, and whether a life settlement would harm their finances.
It’s in the best interests of policy owners to seek professional counsel before agreeing to sell a life insurance policy and agreeing to a particular sale.
To read more on topics like this, check out the lifestyle category.