If you think you no longer need life insurance coverage, you may be wondering if it’s possible to sell your life insurance policy. It’s important to take into consideration that selling your policy means your beneficiaries would no longer receive the death benefit when you pass away. However, there is a chance you could sell your policy for extra cash. Here’s what to know about selling your life insurance policy.
How do you sell a life insurance policy?
You can typically sell your life insurance policy to a life settlement broker or company if it’s worth $100,000 or more and you’re of a certain age. When you sell your life insurance policy, it’s called a life settlement—or sometimes call a viatical settlement. The broker or company will pay your premiums and receive the death benefit when you die.
Reasons Why People Sell Their Life Insurance Policy
There are many reasons people consider selling their life insurance policies. Whether you no longer need coverage, your term length is almost up or your policy is no longer affordable, the option of selling is an option to consider. Oftentimes, seniors and terminally ill individuals will have the most success selling their policy.
Pros of Selling Your Life Insurance Policy
There are a few benefits in which you may consider selling your life insurance policy for cash, including:
- No more premium payments
- More cash value than surrender value
- Return of money you’ve paid in
- Access to cash
Cons of Selling Your Life Insurance Policy
While the extra cash may seem appealing, there can be some downsides to selling your policy, including:
- Low payouts
- High overhead costs
- Potential tax liability
- Potential ineligibility for financial assistance
- Beneficiaries no longer receive a death benefit
Alternatives to Selling Your Life Insurance Policy
You may find that selling your life insurance policy isn’t all that beneficial for you or your beneficiaries. Cancelling your current policy, adding riders, or finding a way to lower your monthly premium may be a better solution. Some carriers may allow you to lower your coverage amount, which could help reduce the cost of premiums.
If you have a whole life insurance policy, you may be able to surrender your coverage and receive some of the cash value or you can use your accumulated cash value to help pay for premiums.
Understand Your Life Insurance Policy Options with SelectQuote
There’s a lot to understand when it comes to life insurance. Whether you want to know more about selling your policy, are looking for a better rate or have concerns about your coverage, we can provide transparent answers and an abundance of information and support.