Sell Your Life Insurance Policy For Cash

Can you really sell your life insurance policy for cash?

“Can you really sell your life insurance policy for cash?” is often the first question we are asked. “Is selling your life insurance policy a good idea?” and “How old do you have to be to sell your life insurance policy?” are close behind.

The short answer to each question is ‘ it really depends.’

Who buys life insurance policies?

Let’s start with Who buys life insurance policies? Life settlement providers typically purchase life settlements for life settlement investors or buy viatical and life settlements for their own life settlement portfolios.There are sometimes also life settlement brokers who broker the sale of  life insurance policies involved in a transaction between life settlement providers and you if you are trying to sell your insurance policy.

Life settlement and viatical buyers often look at valuing your insurance policy from different angles and with different purchase parameters with respect to time and money. It is important to understand how your life insurance policy is valued before you just start calling a list of companies that buy life insurance policies.

How old do you have to be to sell your life insurance policy?

There are many variables that go into the valuation of a life insurance policy as a life settlement or viatical settlement.  No two life settlement cases are the same. Your age, health, and the type and amount of your life insurance policy matter most. The average life expectancy for 65 year olds in the United States has increased slowly, but consistently, for more than 50 years and is currently at 18 years. If you want to know if you can sell your life insurance policy if you are under 65, consider that someone, the life settlement buyer, will likely be paying your premiums for 18 years or longer.

Regardless, there are life settlement buyers that will buy certain life insurance policies from reasonably healthy individuals, depending on the policy, down to around age 60. People are often shocked that they are able to sell the policy for as much or more than they paid into the life insurance policy over the years. Even term insurance and policies with no cash value may have a value in the secondary market for life insurance as a life settlement.  No one over age 65 should cancel, surrender, or lapse a life insurance policy without first checking to see if it has value as a viatical of life insurance settlement.

Sell your term life insurance policy

It surprises some people that term life insurance policies and other policies with absolutely zero cash value may have value as a life settlement.  Offers are usually confined to convertible term life insurance policies, but you can sell your term life insurance policy provided that you qualify from an age and health aspect.

It is not uncommon for someone who sells their term life insurance policy for cash to receive as much cash as they have paid into the term life insurance policy over the years. A typical 75 year old male will have paid $50,000 in insurance premiums over a 20 year period for a $1,000,000 term life insurance policy if his premium was $2500 per year.

It is not uncommon for that same 75 year old to receive as much, if not more, than he has paid into the policy over the years, depending upon his health and the particulars of the term life insurance policy he is trying to sell.

Hopefully you no longer need your life insurance policy and are not trying to sell your life insurance policy for cash to put food or medicine on the table, but often the hidden value in a life insurance policy is one of the largest assets that someone has. Sadly, over $200 billion in policyface value is lapsed or surrendered each year.¹  These policies could have and should have been sold instead, allowing policy owner to recoup some (or all) of the funds invested in premium payments.

Though you do not have to be chronically ill or have a terminal diagnosis to have a hidden value in your life insurance policy, generally, the worse your health, the higher the value of your life insurance policy as a life settlement. Viatical settlements are the sale of insurance policies by people who have had the misfortune of being diagnosed as terminally ill, generally with a life expectancy of 2 years or less.

If you are terminally ill, your insurance policy may be worth much more than you realize and the proceeds of the sale of an insurance policy are generally tax free if someone is terminally ill. If you are not terminally ill or even if you are in sound health, generally anything you receive above and beyond your cost basis in the life insurance policy is taxable. Typically, any roll over monies or premiums you have paid into an insurance policy is your cost basis and anything above that amount is taxable. Tax treatment does vary by state and you should always check with your trusted tax advisor on matters of this nature before inadvertently creating negative tax consequences.

If you are trying to value your life insurance policy, there is no perfect “sell my life insurance policy calculator button” you can push to give you an exact value. To arrive at an exact value of your life insurance policy, your medical information and insurance policy information would have to be formally acquired and reviewed. Even then, no two life insurance policies are the same and depending upon your health and the type of life insurance policy you have, you only truly know what a life insurance policy is worth when you begin to get offers and bids. Before you start releasing all of your personal medical information and life insurance policy specifics to the masses, please take the time and do a little homework.  Although you cannot obtain an exact value without a formal valuation, life settlement calculators can give you a general idea.

Is selling your life insurance policy a good idea or not?

If one no longer needs insurance, has more insurance than they need, or would otherwise lapse a policy due to increasing premiums, selling an insurance policy can be an easy decision.  Sometimes, individuals need or desire to maintain part of their life insurance.  It is possible to sell a portion and retain a portion of your life insurance policy. If you are chronically ill, you may qualify for a life insurance loan or a life insurance advance. With a life insurance loan, you can usually borrow from your life insurance policy tax free and retain a portion of your life insurance policy for your loved ones.

The best place to start if you are looking at the life settlement market to sell your life insurance policy is by seeing if you qualify and determining if your life insurance policy has value as a life settlement. Please allow us to help you.

Call our friendly, knowledgeable staff before attempting to sell your life insurance policy for cash.

The best place to start if you are looking at the life settlement market to sell your life insurance policy is by seeing if you qualify and determining if your life insurance policy has value as a life settlement. Please allow us to help you.

1. McGonnell, Shane. “Why Life Settlements Are Becoming A Mainstream Financial Option.” Forbes.Forbes.com, 07May. 2020. Web. <Why Life Settlements Are Becoming A Mainstream Financial Option (forbes.com)>