In many instances, life insurance policies provide both peace of mind and financial security. If you were to pass away unexpectedly, your family would receive the death benefit of the policy in cash, allowing them to offset the loss of your income. However, in some instances, life insurance policies can become unnecessary burdens. In these cases, the choice to sell a life insurance policy for cash might be beneficial.
Why might you no longer need your life insurance policy? Why should you consider a life insurance settlement?
Before we touch on why you might benefit from the decision to sell a life insurance policy for cash, we need to address the process by which you accomplish that. This is called a life settlement, and it involves working with a trusted life settlement broker to sell your policy to a “provider” or buyer.
A life settlement allows you to sell your policy for less than the death benefit specified in the policy, but for more than the cash surrender value. It ensures that you receive a lump sum of cash that can be used in any way you might want, but it does mean that you will no longer be the owner of the policy and that your previously-named beneficiaries will be removed from the policy and replaced with that of the buyer.
As mentioned, there are quite a few reasons that you might consider selling your life insurance policy for cash. Some of the more common reasons include the following:
- To qualify for Medicaid: If your life insurance policy is preventing you from qualifying for Medicaid, selling the policy can help with
- To pay for medical expenses: It’s common for seniors to suffer from unpaid, mounting medical bills. Selling a life insurance policy can give you the cash to catch up.
- You can no longer afford the premiums: Often, life insurance premiums can become too much of a financial burden. Selling your policy allows you to tap into the equity you have built without throwing it away.
- You are over-insured: Have too much insurance? Have redundant coverage? Sell your life insurance policy and benefit from an influx of cash.
- To fund your retirement: Planning to retire and want to ensure you have the largest nest egg possible? Selling an unneeded life insurance policy can ensure you have the funds needed to maintain your lifestyle.
- For estate planning purposes: Want to ensure that you’re able to leave something for your heirs? Selling life insurance coverage ensures that you can do exactly that.
- You no longer need the policy: No longer need the life insurance policy? Don’t let it lapse. Sell the policy and benefit financially from the equity that you have built.
As you can see, there are plenty of reasons to consider selling life insurance. However, there are some instances in which you might be better off keeping your policy.
For instance, if the income generated from the sale negates the benefits and leads to unanticipated tax consequences, it might be best to wait and sell later. If you have creditors that might claim your benefits, it is better to not sell your policy.
Other instances in which selling a life insurance policy for cash might be inadvisable include potentially eliminating money left to your heirs, or if there is a significant risk of you outliving the additional influx of capital.
On the fence about whether or not to sell your life insurance policy? Interested in learning more about the life insurance settlement process? We invite you to contact us at Life-Settlement.com.
We’ll be happy to address any and all of your questions, as well as help you obtain free quotes from qualified, licensed buyers interested in purchasing your insurance policy.