In our last blog post, we discussed the various option of exchanging a permanent life policy using the 1035 rule.
Now we will show you how to sell your permanent life policy.
Life Settlement
Selling a life insurance policy is called life settlement, in essence, the life settlement company pays you a negotiated amount, takes over the premium paying responsibility, and collects the death benefit in the end when the insured dies.
Life-settlement investors are primarily interested in buying cash value policies or term policies that can be converted to cash value policies. The size of the settlement varies, depending on the size of the premiums and the policyholder's life expectancy (usually 12%-25% of the death benefit, but someone with a terminal illness can receive more).
Why Life Settlement
Why would a cash value policy holder sells to a life settlement company?
Because you can get more than the cash value. For example, someone in the 70's with a $2 million death benefit but only $200K cash value might get half million life settlement money.
There are two options you can pursue here.
a. Contact an insurance broker
The broker will negotiate with the buyers on your behalf. It's important to check your state insurance department and find out whether the broker is licensed, also ask if the commission is based on death benefit or the life settlement payout.
b. Contact the life settlement company
You can find a list of life settlement companies through your state insurance commission or Life Insurance Settlement Association's website. The benefit of this option is you don't have to pay a commission to a broker.
The Bottom Line
If you need money, the premium is a drag on your retirement life and don't want to pass the death benefits to your heirs, selling your permanent life policy is a good option. However, taxation of life settlement payouts remains murky, consult your accountant before you taking any action.
Now we will show you how to sell your permanent life policy.
Life Settlement
Selling a life insurance policy is called life settlement, in essence, the life settlement company pays you a negotiated amount, takes over the premium paying responsibility, and collects the death benefit in the end when the insured dies.
Life-settlement investors are primarily interested in buying cash value policies or term policies that can be converted to cash value policies. The size of the settlement varies, depending on the size of the premiums and the policyholder's life expectancy (usually 12%-25% of the death benefit, but someone with a terminal illness can receive more).
Why Life Settlement
Why would a cash value policy holder sells to a life settlement company?
Because you can get more than the cash value. For example, someone in the 70's with a $2 million death benefit but only $200K cash value might get half million life settlement money.
There are two options you can pursue here.
a. Contact an insurance broker
The broker will negotiate with the buyers on your behalf. It's important to check your state insurance department and find out whether the broker is licensed, also ask if the commission is based on death benefit or the life settlement payout.
b. Contact the life settlement company
You can find a list of life settlement companies through your state insurance commission or Life Insurance Settlement Association's website. The benefit of this option is you don't have to pay a commission to a broker.
The Bottom Line
If you need money, the premium is a drag on your retirement life and don't want to pass the death benefits to your heirs, selling your permanent life policy is a good option. However, taxation of life settlement payouts remains murky, consult your accountant before you taking any action.
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