A life insurance policy is an insurance policy that pays out a death benefit when the policyholder dies. One of the main reasons people take out a life insurance policy is to prevent their family from incurring extra expenses when they pass away. Critical costs, such as paying for a funeral and paying off debts, can be covered with the death benefits. Death benefits can also be used to provide for the deceased’s spouse or minor children.
Life insurance policies aren’t crucial for everyone, however. There are several reasons you may not need your life insurance policy, and if you feel having a policy is redundant, you may be wondering if it’s possible to sell it. Most people can sell their life insurance policy, although some stipulations may affect how and when you sell it.
Anyone with a life insurance policy can consider selling their policy. To qualify to sell the policy, you must be up to date paying your monthly premiums. In some cases, sellers may not consider purchasing a new policy.
There are three main options you can consider if you want to sell your life insurance policy. You can consult viatical settlement providers to determine if you qualify for a viatical settlement. Viatical settlements are available for people with terminal or chronic illnesses. A viatical company will review your medical records to confirm that you qualify. They’ll ensure the policy payments are up to date and locate a third party who will buy the policy. The viatical company handles all the paperwork. Once the transaction is complete, the buyer becomes the policy’s beneficiary, which means that your original beneficiary won’t receive benefits from the policy when you die. The buyer also takes on the responsibility for paying future premiums owed.
As the original policyholder, you’ll receive a single lump sum payment of cash. Profits from a viatical settlement are not subject to income tax.
If you don’t qualify for a viatical settlement, you could opt for a life settlement. People who qualify for viatical settlements have a shorter life expectancy. If you aren’t expected to pass away within two years, you can opt to pursue a life settlement. The process is similar to obtaining a viatical settlement, except your medical records won’t be reviewed. A broker locates a third party buyer who pays a lump sum of cash for your policy. The buyer is responsible for any future premiums owed, and they become the policy’s beneficiary.
Other than who qualifies for a viatical or life settlement, the key difference between these settlement options is that viatical settlements pay more. This is because the buyer will likely receive the death benefits within two years of the purchase date. Both viatical and life settlements pay less than the policy’s death benefit amount.
Instead of selling your policy, you can also opt to cash it in for its cash-in value. You consult the insurance company that sold you the policy and arrange to cash in. You won’t receive as much money as you would from a viatical or life settlement, however.
Use of Funds
There are no restrictions that apply to the funds you receive from selling your life insurance policy. Perhaps you plan to install a pool in your backyard. Inground pools can be constructed from fiberglass, vinyl, or concrete. Work with an expert pool builder to design a pool that suits your yard space. You can supplement your pool with a hot tub or waterfall feature.
Whether you want to add a custom concrete pool to your yard, buy your dream home, pay medical bills, or take a dream vacation, you’re free to use the funds in any way you choose.
Reasons to Sell
You could opt to sell your life insurance policy because you can’t afford the monthly premiums. You may also sell your policy because you have more than one policy that will meet your needs. Individuals who are wealthy and those who have paid off their debts and paid for their final arrangements may decide they don’t need a life insurance policy.
Most people who are up to date with their monthly payments can opt to sell their life insurance policy. Their options will vary based on their health and life expectancy. Individuals who are terminally or chronically ill will qualify for a viatical settlement, while other policyholders can pursue a life settlement. Once the policy is sold, the seller can use the funds they receive however they choose.
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