What to Do With Your Unwanted Life Insurance Policy

There are various reasons why seniors may think of letting their policy lapse. In some cases, according to Life Insurance Solution’s Michael Browhan, the premiums may not be as affordable as it once was, or there isn’t any beneficiary for the money anymore.

However, if a person had a policy in place before the recent rise in estate tax consumption, they may no longer need to insure the taxes.

No matter the reason, one way to deal with a life insurance policy, you no longer want is to sell it. Investors are willing to pay you cash for it; if you meet specific criteria. They will get the benefit when you die.

Financial planners such as Ashley Foster believe the conversations around cashing out a life insurance policy are somewhat weird. However, when people have issues that hamper regular payment of premiums, or they have no need for insurance, it often makes sense.

Now, the disturbing part is thinking that strangers will benefit when you die. But, it is usually better to sell the policy than simply walking away from it or only getting the surrender value. Planners also give the analogy of a non-performing mutual fund that one owns. No one gives it back to the mutual fund company.

How Do “Life Settlements” Work? The transaction typically involves a company called a life-settlement company. They want to give you cash and take your policy. They relieve you of paying premiums, and as investors, they pick up returns when you die.

The Life Insurance Settlement Association says your life policy holds value for investors if you’re 65 or older, the benefit is no less than $100,000, and it has value to investors.

What Happens When You Sell the Policy? Unless you die, the policy remains active, but premiums are no longer your problem. Once you sell your life insurance, it sits in a blind pool that a financial institution separate from the buyer oversees.

They can only resell your policy along with other policies in a much bigger transaction. Therefore, there's privacy baked into the deal.

Universal or whole-life policies with good cash value often attract life-settlement investors. Term-life policies with the option to convert to permanent insurance are also good investments.

Managing Your Expectations The face value of your policy can be misleading. Don't expect to get it. The settlement is usually above the cash value, but less than the death benefit. The precise offer depends on several factors, such as the premium, cash value, and whether there are loans against the policy.

To maximize proceeds from your life insurance buyout, Michael Browhan can help you all the way.