Understanding the Policy
Life insurance policies are usually long term. Times change, circumstances change, and sometimes, the policies lose their usefulness. Like when children are all grown up and you have no more dependents for beneficiaries. At such times, you always have a choice to sell your policy off.
How it Works
Life insurance policies are like a financial asset. They have a monetary value and thus can be sold for that cash-value. However, not every policy can be sold for cash. Some factors need to be weighed in before you know the value of our policy. Generally speaking, if you have crossed 65 years of age and have a good life expectancy based on your health and demographic, your policy can be sold.
Why Consider Selling?
First and foremost, it’s your circumstances that decide if it’s time to sell or not. In case you have no more dependents (children grown up, spouse deceased, etc.) and you do not need coverage anymore, than paying premiums every month might look like an extra cost. Selling it will give you ready cash and you will have one less bill to pay every month.
Another factor is premium payments which are an extra cost for your living expenses. If you think the premium you’re paying is not worth the coverage you are getting, then perhaps it’s time to sell.
A universal life insurance policy which is the one usually sold accumulates cash-value to your account. So it is like a financial asset and a part of your financial portfolio. You can calculate the ROIs yourself and make your decision based on your situation.
Things to Remember
- Selling your policy will fetch you 25 – 50 % of the coverage amount.
- There will be some cost involved in the form of the processing fee
- There will no more be any beneficiary payments when the policyholder/seller dies.
- Not every policy can qualify for selling. For example, a 45-year-old female with a term life insurance of $250,000 doesn’t qualify as seller policy but an 85-year-old man with a heart condition and universal life insurance policy worth $100,000 can easily sell his policy for $50,000.
Factors Determining the Value of Your Policy
Even when you think you do not need your life insurance anymore, you may not be able to always sell it. Some of the determining factors being:
- Type of policy: Investors and institutions usually like to buy Universal Life Insurance policies
- Benefits amount: Policies with benefits exceeding $100,000 have a better chance of catching a buyer.
- Policy holder’s age: Usually those above 65 are the ones who can sell
- Equity: Any equity you have accumulated increases the worth of your policy.
- Remaining premium payments: Lower amount of due premiums make for a higher value.