How to Sell a Life Insurance Policy
[social_share]Many life insurance policy holders are not aware that they can sell their policies. For people who are of an advanced age and who are without debt and no longer have dependants under their care, selling a life insurance policy can make sense. It provides them with a surplus of cash that they can use as they see fit or can simply provide extra financial security in their retirement years. But how does one go about selling a life insurance policy?
Most policy holders who want to sell their life insurance policy will end up selling to an investor. The investor, in turn, pays the policy holder for a percentage of the policy’s value. Rather than resell the policy right away and making a profit, the investor holds the policy and fulfils the monthly payment obligations on it until the original policy holder dies. The investor is typically notified of the policy holder’s passing through the policy holder’s lawyer. When it is confirmed that the policy holder passed away, the investor is paid the value of the policy by the life insurance provider.
Many life insurance policies have dependants attached to them. Because of this, investors will often require that dependants be notified when the life insurance policy has been sold. For an extra measure of assurance, some investors will obtain the dependants’ signatures to demonstrate that they understand a sale of the policy has been completed. This is done to ensure that the dependants know not to expect a death benefit since the policy is now under someone else’s control. For this reason, policy holders interested in selling their policies are advised to notify their dependants before finalising the deal.
An investor who purchases life insurance from a policy holder can end up with two types of settlements. A viatical settlement is one in which a policy holder who is terminally ill sells their policy in order to boost their cash reserves, usually to help cover medical costs. Less risk is involved because the investor has an approximate idea of when the policy holder will pass. As a result, the investor will receive a larger settlement, typically within the range of 50% to 80% of the value of the policy. A life settlement is a settlement in which the policy holder seeks a payout with their policy by selling to the investor. The policy holder is not terminally ill, however, so the risk on the part of the investor is greater than with a viatical settlement. Greater risk results in less of a settlement, which often results in a pay out of under 50%.
