Are you looking to sell your life insurance policy? This can provide quick cash when you need it most. Selling your life insurance policy can provide fast cash, whether through a life settlement for healthy seniors or a tax-free viatical settlement for those with serious illnesses. Consider how selling your policy affects your beneficiaries, and consult a financial advisor to ensure it’s the right choice.
Whether you need immediate cash for a medical emergency, retirement, or no longer wish to pay premiums, selling your policy can be a game-changer.
Can You Sell Your Life Insurance Policy?
There may come a time when you no longer need or want your life insurance policy. While your life insurance may have been a financial safety net that protected your beneficiaries from financial struggles in the event of your passing, you may find that your plan no longer suits you.
Whatever the reason you’re thinking of giving up your life insurance policy, you can do something better than just canceling it—you can sell it!
Everything You Need To Know About Selling Your Life Insurance Policy
- How Do Selling Life Insurance Policies Work?
- The Two Main Ways You Can Sell Life Insurance Policies
- Pros & Cons of Selling A Life Insurance Policy
- Selling Your Policy: Is it Worth it?
- Alternatives to Selling Your Life Insurance Policy
- FAQ About Selling Your Life Insurance Policy
How Does Selling A Life Insurance Policy Work?
A life insurance policy is an asset you own; as a policyholder, you can cash out your life insurance policy for a payout.
There are two main ways of selling your life insurance policy: Life settlements and viatical settlements.
While there is some overlap between these two options, there are also some key differences, which we will detail below.
The Two Main Ways You Can Sell Your Policy
One might choose to sell their life insurance policy if they have a financial emergency, need more money for retirement, or simply don’t want to keep up the premiums.
With both life and chronic illness life insurance payout, you sell your insurance policy to a third-party buyer in exchange for a lump-sum cash payment. The buyer then takes over the responsibility of paying the premiums on the policy. In return, they become the new beneficiary of the policy’s payout upon passing and will collect it upon your passing.
Selling Your Policy Through A Life Settlement
In general, a life settlement is for healthy seniors, those aged 75 and older, looking to cash out on their life insurance policies. There are certain eligibility requirements for senior life settlements, including policy age, policy minimum, etc.
The payout for a policy sale for cash is typically more than the policy’s cash surrender value but less than the policy benefit. The exact figures will depend on the policy’s premiums, the policy amount, and the policyholder’s life expectancy.. However, it is also worth noting that with a life settlement, you will have to pay taxes because they are considered income. This is not the case with viatical settlements, as you’ll learn in the next section.
Selling Your Policy Through A Viatical Settlement
Unlike life insurance cash settlements, critical illness settlements are designed specifically for life insurance policyholders who have a life-threatening illness, reduced life expectancy, or chronic health issues. Like with life settlements, there are certain additional eligibility requirements.
Unlike life settlements, the cash payout with a viatical settlement is tax-free , meaning you can spend it however you’d like. And who doesn’t love financial freedom?
If you qualify for a viatical settlement, you can work with a health-related policy sale company, like American Life Fund, to fill out a brief application that details some basic personal information including your:
- Policy type
- Policy amount
- Diagnosis
- Stage of illness
Typically, your application can be processed in just a few business days, and you can come to a written offer agreement regarding how big of a lump-sum cash payout you can expect.
Will I Qualify To Sell My Life Insurance Policy?
If you have been diagnosed with a life-threatening illness and are looking to transfer your life insurance policy, we at American Life Fund may be able to help.
If you have held your policy for two years or more and have a face-value minimum of $150,000, there’s a good chance you can cash in your life insurance policy for a generous viatical settlement.
See if you qualify for a viatical settlement.
How Does Selling My Policy Work?
When you agree to cash out your life insurance policy to life settlement companies like American Life Fund, you become your policy’s viator (seller), and the life settlement company becomes the buyer.
Once you’ve reached out to a life settlement company with your intent to convert life insurance to cash, you’ll go through a verification process, review your offer, and complete the necessary paperwork.
As your policy’s viator (seller), you will receive a lump-sum cash settlement valued at more than the life insurance policy but less than the end-of-life payout amount. Once you receive your payout, the funds are completely yours, so deciding how to spend your money is completely up to you! In other words, you can use the funds however you see fit!
The provider who has purchased your life insurance policy will then take over by paying the monthly policy premiums and will eventually be entitled to the policy benefit after the viator’s (seller’s) passing.
How Much Can I Get From Selling My Life Insurance Policy?
While the amount you will receive from selling your life insurance will vary depending on a few factors, including your specific policy and its amount, a general rule of thumb is that most people receive 40-70% of the policy’s face value through their viatical settlement.
What Can I Use The Money For?
The wonderful thing about selling your life insurance policy through a viatical settlement is the financial freedom it provides you.
Once your life insurance policy has been sold, and you receive your lump-sum cash payout via a viatical settlement, there are no restrictions on spending your money! While perhaps you’d like to put some of your money towards medical expenses, you can also put it towards dream vacations, living expenses, early retirement–the list goes on and on!
Selling Your Life Insurance Policy Pros & Cons
Here are some of the pros and cons of selling a life insurance policy:
The best thing about viatical settlements is that they can be used for anything you choose—there are no limitations!
Other pros of selling your life insurance policy through a viatical settlement include:
- The process is straightforward, and you’ll receive your funds quickly after starting the process usually within only a few weeks.
- Monthly premiums will become a thing of the past; paying them becomes the responsibility of the company purchasing your policy.
- The cash payouts are tax-free and non-regulated.
- You’ll receive more money than if you simply surrender your policy for its cash value.
- You can use the funds for medical costs, including treatments, care, and quality-of-life benefits. Still, the funds can ultimately be used however you’d like.
- You’ll have access to funds NOW—meaning you and your family can enjoy the funds together.
- Peace of mind! You can focus on the things that truly matter by alleviating financial stress.
When making any major financial decision, it is important to consider all potential aspects. Let’s continue to weigh the pros and cons to determine if a viatical settlement is the right choice for you.
Some potential drawbacks of a viatical settlement include that your beneficiaries will no longer receive the face value of your life insurance policy as a death benefit when you pass away. Additionally, if you have any creditors, they could make claims on your viatical settlement payout amount, so be sure to take care of any outstanding debts beforehand. Also, if you rely on public assistance, such as Food Stamps, Medicaid, etc., your viatical settlement could make you ineligible for these programs.
Is Selling Your Policy Worth It?
Depending on your needs, selling your life insurance policy through a viatical settlement can be a worthwhile choice. A huge benefit of viatical settlements over life settlements or other cash-out options is that the money from a viatical settlement contract is considered tax-free.
When a policyholder sells their policy as a life settlement (instead of a viatical), they have to pay income or estate tax on the money. Viatical settlements are free from federal income tax and other fees, so sellers receive the full offer for their policy, regardless of the type.
A viatical settlement can be a great answer for seriously ill policyholders looking to cash out now and enjoy the financial freedom they would not otherwise be entitled to if they were to keep their standard life insurance policies in place without selling. Cashing out now could mean an early retirement, time off, more time with family, the option for travel, or whatever else you desire. Once you’re ready, you can use a viatical settlement to improve your situation in any way you want.
Let’s put your money back into your hands. See if you qualify today.
Alternatives To Selling Life Insurance Policies?
In addition to selling your life insurance policy through a life settlement or a viatical settlement, there are other options. Let’s go over some of them.
Accelerated Death Benefit
An Accelerated Death Benefit (ADB) occurs when a life insurance policyholder receives a certain amount of their initial end-of-life payout while living. Another name for ADB is “living benefits.” ADBs are usually specifically reserved for those suffering from a terminal illness and who have a life expectancy that is less than two years.
Once the amount is paid out to the policyholder, the policyholder must continue to make their monthly premium payments for the life of the settlement. It is important to note that the amount taken from the overall policy and given to the holder is deducted from the overall face value of the policy, which means that when the policyholder passes, the beneficiary payment will be less.
A smaller insurance death proceeds isn’t practical for certain people and their families, making ADB a poor choice for some.
Borrow Against Your Policy
Borrowing against your policy is a short-term solution, which allows you access to “loaned” funds from your overall life insurance policy. It’s important to understand that these funds must be paid back over time. Interest also accrues on top of the loan amount that must be paid.
Borrowing against your policy can be risky because if the policyholder passes before the loan amount can be fully paid off, the death benefit is reduced by the amount remaining on the loan, plus any interest that has accrued.
Borrowing against your policy is only possible for those with a whole life or permanent policy, not those with a term life policy.
Surrender Your Policy
Surrendering your life insurance policy means you’re giving it up. More specifically, you agree to settle for the cash surrender value, which is less than the face value of the policy. By agreeing to surrender your policy in exchange for the cash surrender value, you’re no longer entitled to the end-of-life payout.
When you agree to surrender your policy, a certain amount is taxable. It’s also important to remember that if you haven’t had your policy for all that long, it likely will not be worth as much as an older policy you’ve had for quite some time—this is because younger policies are usually subject to surrender fees. These are elements that discourage some from surrendering their policy.
Let Your Policy Lapse
If you stop paying your monthly premiums on your life insurance policy, it will lapse–meaning it will no longer be active. Once your policy becomes inactive, you lose all benefits that come with it, namely, the beneficiary payment.
Policyholders who let their policy lapse usually do so either because they can no longer afford the cost of their monthly premiums, they feel they no longer need life insurance coverage, or they no longer need the payout upon passing.
Sometimes, reinstating your policy is possible, but not always. You are also not refunded for any of the money you invested into the policy through your monthly premiums.
Ask To Lower Your Coverage Amount
If you’re struggling to afford the cost of monthly premiums on your life insurance policy but do not want to let it lapse, lowering your coverage amount may be possible, but it depends.
Lowering your coverage amount is usually only possible for policyholders with a permanent life insurance policy, not those with a term life insurance policy.
If the company is willing to lower your monthly payment, it will come at the cost of lowering your policy’s overall face value. In doing so, your end-of-life payout amount is reduced.
There may be other ways to lower your coverage amount. However, it depends on many factors, such as the type and life of your policy, its cash value, dividends (if applicable), etc.
1035 Exchange
A 1035 Exchange occurs when you transfer the funds from one life insurance policy to another.
If you’re hoping to transfer your life insurance policy funds from one policy to another, it’s important that you specifically utilize the 1035 Exchange process, or you risk paying income taxes on any gains from the original life insurance policy.
The decision to switch funds from one policy to another is at the policyholder’s discretion. It may or may not be appropriate for your unique situation and needs.
Take Control of Your Future
Selling your life insurance policy can be the key to unlocking financial freedom and peace of mind, especially if you’re facing mounting medical bills, struggling with retirement income, or simply no longer want the burden of ongoing premium payments. Why let your life insurance policy sit unused when you can convert it into immediate cash, offering the stability and relief you need right now?
Whether you’re dealing with a serious health condition and qualify for a tax-free viatical settlement, or you’re a healthy senior looking to access funds through a life settlement, selling your policy can provide more than just financial security—it can offer peace of mind. Imagine having the ability to focus on what truly matters: spending time with loved ones, enjoying your retirement, or relieving yourself of financial stress.
Don’t wait to take control of your future. American Life Fund is here to seamlessly guide you through the process, ensuring you get the most value from your life insurance policy. Whether you need immediate financial assistance or simply want to use the cash for something you’ve always dreamed of, American Life Fund makes it easy and stress-free.
Contact American Life Fund today to see how much cash you can get from your life insurance policy. Don’t miss out on an opportunity for financial relief and flexibility—let us help you turn your policy into the cash you deserve.
Frequently Asked Questions About Selling Your Life Insurance Policy
Can You Sell Your Life Insurance Policy?
Yes, you can cash out your life insurance policy, including permanent life insurance policies, to a senior life settlement provider through the life insurance cash settlement process. This allows you to receive a lump-sum cash payout in exchange for your policy.
How Much Can I Earn From Selling My Life Insurance Policy?
The amount you can earn from selling your life insurance policy varies, but typically a life settlement transaction will provide you with 40-70% of the policy’s face value. Unlike life insurance cash settlements, viatical settlements (for seriously ill individuals) are tax-free.
Is it Worth It to Sell Your Life Insurance Policy?
For many, selling a life insurance policy to a life settlement provider can offer financial freedom, especially if you no longer need the policy. It’s a valuable option if you want to unlock cash benefits during your lifetime.
How Much Can You Sell a $150,000 Life Insurance Policy For?
If you sell a $150,000 life insurance policy through the life settlement process, you can expect to receive anywhere between $60,000 and $105,000, depending on the specifics of your offer amount.
Should I Sell My Life Insurance Policy?
If you’re seeking immediate financial benefits, selling your policy to a life settlement provider may be a wise decision. The senior life policy sale process allows you to access the cash value of your policy while the life settlement provider takes over the premium payments.
What is the Cash Surrender Value of a Life Insurance Policy?
The cash surrender value is the amount the life insurance company pays you if you surrender your policy before its maturity. Typically, this amount is much lower than what you’d receive through a life settlement transaction.
What is the Death Benefit of a Life Insurance Policy?
The beneficiary payment is the amount your beneficiaries receive upon your passing, typically paid out by the life insurance company.
What is a Life Settlement?
A life settlement involves selling your permanent life insurance policy to a third-party buyer, known as a life settlement provider. In return, you receive a lump-sum cash payment, and the buyer assumes responsibility for paying premiums and becomes the new beneficiary.
What is a Viatical Settlement?
A viatical settlement is specifically for policyholders with a life-threatening illness. It allows them to sell their policy to a life settlement provider for a tax-free lump-sum payout, offering financial support during a challenging time.
How Can I Sell My Life Insurance Policy?
To cash out on your life insurance policy, you can contact a life settlement provider. The process involves reviewing offers, completing paperwork, and ultimately receiving your cash settlement.
What is the Role of a Life Settlement Broker?
A life settlement broker facilitates the sale of your life insurance policy to potential buyers, including life settlement providers. They assist in navigating the life settlement process and connecting you with the best offers. However, they also take a substantial fee directly from your settlement amount for their services.
Can I Sell Term Life Insurance?
Yes, term life insurance policies can be sold through a life settlement transaction, providing policyholders with cash options for policies they no longer need.
Are Viatical Settlements Tax-Free?
Yes, viatical settlements are generally tax-free, offering policyholders the opportunity to receive a lump-sum cash payout without income tax implications, unlike traditional life settlements.
What Happens to Future Premiums After Selling a Life Insurance Policy?
Once you sell your life insurance policy through the life settlement process, the buyer, typically a life settlement provider, becomes responsible for paying the future premiums, freeing you from ongoing financial obligations.
