If you’re wondering whether it’s possible to get cash for a life insurance policy with a loan, the answer is yes, you may be able to sell a policy with a loan in a life settlement or viatical settlement. While having a loan against your policy can impact its value, you may still be eligible to sell it. Understanding how life settlements work, even for policies with outstanding loans, can help you make an informed decision and unlock the cash value tied to your policy.
How Does a Policy Loan Affect Your Settlement Options?
When you take a loan against your life insurance policy, you’re borrowing from its cash value or death benefit. This reduces the net amount available to potential buyers in a settlement. However, buyers in the secondary market will still evaluate your policy’s overall value, including the remaining death benefit after the loan balance is deducted.
For example, if your policy has a $500,000 death benefit with a $50,000 loan, a buyer would assess the net benefit of $450,000. While the loan decreases the payout you can receive, it doesn’t automatically disqualify you from selling the policy.
Factors That Influence Your Policy’s Value
Several factors determine whether you can sell your life insurance policy and how much you can receive:
- Policy Type: Permanent policies (like whole life or universal life) are generally more valuable than term policies unless the term policy is convertible.
- Loan Amount: A smaller loan leaves more of the death benefit intact, increasing the policy’s appeal to buyers.
- Health Status: Viatical settlements are available to individuals with a terminal or chronic illness, while life settlements are generally available to seniors 65 or older.
- Premium Costs: Policies with lower ongoing premiums are more attractive to buyers.
Steps to Sell Your Policy with a Loan
- Evaluate Your Policy: Review your policy details, including the death benefit, cash value, and loan balance.
- Contact a Life Settlement Company: Choose a reputable viatical or life settlement provider to assess your policy’s eligibility. We have been assisting policyholders for nearly 20 years.
- Provide Health Records: If you’re pursuing a viatical settlement, you’ll need to provide medical documentation of your health condition. In most cases, life settlement companies will order your medical records, but obtaining your own records can greatly speed up the process.
- Get an Offer: Potential life settlement buyers will calculate an offer based on the net death benefit and other factors. If value is found and they are interested in purchasing your policy, a cash offer will be presented to you.
- Accept and Finalize: If you accept the offer, the settlement process will involve paperwork and transferring ownership of the policy to the buyer.
Benefits of Selling Your Policy with a Loan
- Access to Immediate Cash: Selling your policy provides a lump sum payment that can be used for medical bills, debt repayment, or other expenses.
- Relief From Premium Payments: Once you sell the policy, you’re no longer responsible for paying premiums.
- Flexible Options: Even with a loan, selling your policy can be a practical solution to financial challenges.
Is Selling Your Policy Right for You?
If you’re struggling to keep up with premium payments or need cash for urgent expenses, selling your policy—even one with a loan—might be the right choice. If you’re considering this route, take the first step today to find out how much your policy is worth. In a short 5-10 minute phone call, learn if you are likely to qualify to sell your life insurance policy for cash. 800-973-8258