If you’re wondering, can you sell part of your life insurance policy?, the answer is yes, it is possible, through a viatical or life settlement with a retained death benefit. This lets you receive cash now while keeping a portion of the death benefit in place for your beneficiaries, so part of the coverage remains even after selling part of the policy.
What “Selling Part of a Policy” Really Means
When people ask to sell a portion of a policy, they are usually talking about a retained death benefit within a settlement.
Retained Death Benefit (RDB)
In a retained death benefit, you sell a portion of your life insurance policy and receive a lump sum. The buyer becomes the new policy owner and makes premium payments. When the death benefit is paid out by the insurance company, your beneficiaries receive the retained death benefit amount and the buyer receives the rest.
Ways to Access Value Without Selling the Whole Policy
- Viatical Settlement with Retained Death Benefit: This provides cash now plus a portion of the benefit later.
- Life Settlement (Non-Terminal): You may obtain a possible retained death benefit as part of the offer if your policy is large enough and significant hidden value is found.
- Accelerated Death Benefit Rider: With this rider, your insurance company advances some of the death benefit while you keep the policy.
- Policy Loan or Withdrawal (Universal or Whole Life): Some policies allow you to withdraw part of the cash value. This reduces the death benefit and may require ongoing premiums.
- Partial Surrender (if allowed): A partial surrender permanently reduces face amount and may have tax consequences. Not all policies offer this option.
- Premium Optimization or Reduced Paid-Up: This option allows you to keep some of your coverage with lower or no premiums.
Common Reasons People Choose a Retained Death Benefit
- You need cash now for treatment, care, or major expenses, and you want your family to receive some of the benefit later.
- Premiums are difficult to maintain and you might otherwise lapse the policy.
- The policy has a sizable face amount and a full sale would leave your beneficiaries without any protection.
- You want to exchange only a portion of the policy’s value for liquidity while retaining a meaningful legacy.
Eligibility Basics
- Policy Type: Universal life, whole life, indexed UL, or convertible term policies often qualify.
- Face Amount: Mid to higher face values typically qualify. Keeping part of a smaller policy is sometimes possible, but offers may be limited.
- Health Status: Advanced or life-limiting diagnoses apply for viatical settlements. Chronic or age-related factors are usually required for life settlements.
- Premiums and Performance: Premium load relative to face amount and life expectancy must be reasonable.
- Ownership and Liens: Existing loans or collateral assignments can reduce flexibility. You must be the policy owner in order to sell a policy.
How a Retained Death Benefit Works
- You receive a lump sum now.
- The buyer takes over premium payments.
- At claim time, your named beneficiaries receive the agreed portion of the death benefit, while the buyer receives the remainder.
- The exact part you keep is negotiated based on face amount, premiums, age, and life expectancy.
What to Prepare
- Policy Documents: original contract, in-force illustration, current death benefit, cash value if any, riders, and loan status.
- Key Dates: issue date, conversion deadlines for term, and any pending premium due dates.
- Beneficiary Details: names, percentages, and any required updates before ownership changes.
FAQs
Can I choose the exact percentage to keep?
You can request targets, but the final portion depends on policy economics and the structure offered.
Is a retained death benefit better than an accelerated death benefit?
It depends on your policy and needs. An accelerated death benefit advances some of the benefit while you keep the policy, but this option is only available for some policies and you must meet the guidelines required by the insurer.
Can I sell only part of a term policy?
This is sometimes possible if the term policy is convertible.
Retained Death Benefit Balances Cash and Coverage
A viatical settlement or life settlement with a retained death benefit provides cash from a policy while coverage for beneficiaries stays in place. It delivers funds now and preserves a benefit for your loved one. To learn if you are likely to qualify, please give us a call at 800-973-8258
DO YOU QUALIFY?