Owning life insurance sets your family up financially when you pass away. You pay premiums for the policy for a certain period, and the insurance company pays your beneficiaries the death benefits due them. Some people opt to sell their policies in exchange for cash for several reasons, such as urgent medical needs, retirement plans, etc. Selling your life insurance policy for cash is more common than you think. A life settlement is another term for this practice. Legitimate life settlement companies buy in-force life insurance policies from eligible policyholders.
It is more common than you think
Selling life insurance policies is very common. There may be situations in the life of the insured that may force them to sell their policy. The sale may be for urgent financial needs or for other purposes such as planning for retirement. Settlement companies are aplenty; they help policyholders turn their insurance plans into liquid cash that they can spend however they want to. There are no restrictions on how the sellers can spend the proceeds.
Sell versus surrender
Some people opt to surrender or cancel their life insurance policies because they can no longer afford the premiums that they have to pay. If you surrender your policy, you will be dealing with the insurance company that you bought it from, and they will dole out the cash for the surrender. The amount that you will receive, or the surrender amount, is much less than the death benefit your beneficiary will receive should you pass away. The insurance company will base the cash payment on the policy contract.
However, if you opt to sell, you will be dealing with a third party or the settlement company. The said company will buy your life insurance and pay for the remaining premiums. They will then become the sole beneficiary of the stated policy and claim the proceeds in the event of your death. The settlement amount is more than the surrender amount but is also less than the death benefit. Comparing the two options, selling the policy is the better choice.
Looking for a settlement company
Should you wish to cash in your insurance policy, you must search for a life settlement company that will buy your policy from you. These settlement companies adhere to insurance industry regulations to protect both them and the policyholders. They will offer you an amount based on your age, health condition, and eligibility. You must first pass their eligibility requirements. Not every policyholder can sell their policy.
Should you require immediate cash and you have no other means of getting it, you can look into if your life insurance is eligible to sell. But as long as you can hold on to it, do so. Leaving your beneficiaries with a comfortable amount of money if you pass on is a legacy that they will cherish for a long time. You will help them live financially well in the coming years with the death benefit. Look for other means to fund your financial needs instead of looking to your insurance policy.