Sell A Life Insurance Policy
Actually, it is possible to sell a life insurance policy in order to obtain cash; in fact, some people buy such a policy as a form of investment. "And it shall be, as with the people, so with the priest; as with the servant, so with his master; as with the maid, so with her mistress; as with the buyer, so with the seller; as with the lender, so with the borrower; as with the taker of usury, so with the giver of usury to him." (Isaiah 24:2). Indeed, not everyone is aware of the fact that a life insurance policy can be a hidden asset. After all, these policies are commonly viewed as income protection for survivors, usually family members, in the event of the earner's death. But in addition to this, a person being able to transact this sale means that they are in possession of a viable tool of investment. Certainly, most people are aware of the fact that investment tools, such as municipal bonds, accumulate wealth which can be applied toward buying property, education, and retirement. However, when an individual decides to sell a life insurance policy for cash value then that policy is regarded as an investment.
First of all, the term life insurance settlement is used when someone arranges to sell a life insurance policy. And the third party who buys is referred to as the settlement provider. In addition, it could be the case that provider representatives or settlement brokers can help with the sale. Further, upon settlement the original owner is released from the obligation to pay the premiums. Likewise, the original owner is no longer entitled to receive any maturity benefits. By the way, the so-called settlers, although named as the insured, need not be the owners. At any rate, these settlements enable the owners to obtain some of the death benefits before they pass away. But do note that this was not always the case. Previously, if an owner no longer desired to keep the policy then they could exercise their option for cash surrender. That is, by discontinuing then the owner could opt to receive the cash surrender value which is the amount of money payable to the owner at that point. Otherwise, the only other option was simply to allow the agreement to lapse. But now, a settlement provides the opportunity for the owner to conduct the sale for a predetermined amount which involves the insured's life expectancy in combination with the policy's cost. Thus, the ownership of what is termed an in-force policy is thereby transferred to the party desiring to purchase. However, the amount owners receive is not the amount of the face value. As a rule, the amount received tends to be a certain percentage of that face value.
As a matter of fact, there are several different reasons an individual may decide to sell a life insurance policy. For instance, perhaps the loved one the policy was intended to cover has passed away. Therefore, the original intention is obviously no longer valid. Or perhaps the owner wants someone to receive the proceeds while they are still alive so they can experience the recipient's joy upon acceptance. Another reason for an owner to sell a life insurance policy could be the decision to obtain another kind of insurance product, for example, a new policy or one involving long-term care. Yet another reason could be the desire to endow an institution or give to a charity with which the owner is impressed. In any case, owners should also become familiar with the details of the accelerated benefits connected with such settlements. Incidentally, these benefits are also called living benefits because they are received while the owner is still alive. Namely, these benefits can be made available in the case of catastrophic, long-term, or terminal illness. But as these living benefits do not apply to every life insurance policy, and as there is usually a fee charged for this, experts recommend that owners consult with either a lawyer or financial planner to explore this area.
Now, before the sales process can begin, the right to sell a life insurance policy must first be established. To this end, the owner's consent must be obtained since only they have the right to sell. Next, a person begins to search for those who might have an interest in purchasing. To this end, the state Department of Insurance is a source of information about licensed settlement companies, which are also called viatical companies. This department will be aware if any such companies are based in that particular state. If so, the owner obtains a list of them together with the viatical companies' contact information. However, if the department is unable to supply this information, then the next step is to conduct an Internet search. But before the sale transaction is actually initiated double checking certain points is a very good idea. First, a person should make sure that each of the beneficiaries has been made aware of the intention to sell. Because it might be the case that beneficiaries were expecting the death benefits to cover medical costs or funeral arrangements. Also, a person should be sure to consult with a professional in order to ascertain the impact the sale would have tax-wise. And of course an individual should become familiar with the laws governing the behavior of viatical companies. Also, if a person is receiving public assistance of any kind, finding out exactly what effect the sale will have in this area is important. And too, if someone has outstanding debts it should be taken into account that the proceeds could very well end up going to their creditors instead. And finally, before selecting a company, experts highly recommend comparison shopping.
In the end, the decision to sell a life insurance policy can be regarded as turning an investment profit, just as long as one keeps an eye out for certain pitfalls. Furthermore, there may be no need to sell a life insurance policy at all: perhaps one would prefer to take out a loan against it instead. So, one should carefully consider whether this life settlement loan would be a better alternative to the sale. Also, one should be prepared for viatical companies having the right to demand access to their private medical records. This is due to the fact that the purchaser makes more money the longer the life expectancy is which is why they examine the records down to the last detail. In addition, these companies have the right to continue keeping track with phone calls and so forth. But if these facts do not act as a deterrent, then such a purchase with an eye to future sale can be a sound investment.
Sell Life InsuranceThe decision to sell life insurance policies to third parties can be a difficult one, but may make great sense in certain situations. When a policyholder decides to offer their policy for sale, it is called a viatrical contract. This is often done by individuals who are senior citizens or who suffer from a terminal illness. Prices for these transactions can vary, but a seller will usually receive at least a percentage of the face value of the policy. The purchaser will then continue to pay the premiums and will collect on the policy when the original holder passes away. Family members may step forward to purchase a policy. There are also investment pools who see such transactions as investment opportunities. Of course, not only senior citizens and the terminally ill make the choice to sell life insurance. Young and healthy individuals will often enter into such contracts in order to obtain needed cash. There are many pros and cons involved in making the decision to pursue the sale of a life insurance policy. If an individual is considering this step, speaking with a professional settlement broker might be a good idea. There are, of course, tax implications attached to entering into a viatrical contract. But, in some cases, payouts are taxed at lower rates, such as capital gains taxes, so this may not be a large issue. To be safe, it might also be wise to speak with a professional tax consultant before making a final decision.
Cashing in on these policies can have a number of advantages for anyone who wishes to sell life insurance. Of course, it is important that the policyholder thinks long and hard about this decision. Keeping in mind that not every contract should be pursued is crucial. A potential seller should ask some very important questions before moving forward. An honest evaluation of insurance needs is absolutely necessary. If the individual is at a point where they still need to maintain such coverage, they should not sell the policy for any reason, and particularly not to simply obtain cash. This can constitute a short term solution that can have negative consequences later on. In the event of a sale, how is the value of the policy decided? Will the seller have any say in how much money is paid? Are there fees and commissions that the seller will need to pay? Are there any privacy issues involved? Will other individuals have access to private information such as medical records? Can the policy be resold later to another person or organization? If the seller reconsiders the decision to sell, is there a built in grace period during which a seller may change their mind? One more important consideration involves future coverage needs. If, at some point in the future, the seller finds that they need to obtain a new policy, will age and health be a factor that prevents the purchase of such coverage? If any of these questions raise important hindering factors, perhaps the decision to sell life insurance is not a good one.
Consideration for beneficiaries should be regarded before choosing to sell life insurance. Are there potential beneficiaries that will be left in a state of hardship if the policyholder decides to pursue a contract on the policy. Of course, there can be economic factors that come into play. If premiums have become too high for the insured individual to pay, a viatrical contract may be a wise choice. Potential buyers should be investigated before signing an agreement. Unscrupulous buyers or investment groups should obviously be avoided. There may be a request on the buyer's part to view the seller's medical information, and this is certainly understandable. As difficult as it may be to deal with, the life expectancy of the policyholder does impact the viability of the deal. Because such personal information is being exchanged, a seller should make sure that they are informed on the privacy policies of the buyer. As the steps to sell life insurance are finalized, a number of factors will come into play when deciding the amount of cash that will be awarded to the policyholder. What is the death benefit amount that is offered by the policy that is for sale? What type of coverage is being offered? What is the dollar amount of the premiums that the buyer will be taking over?
These are just a few of the questions that should be asked before making a decision to sell life insurance. Policy holders will generally want to know a little more about just who will own their policy once it has been sold. In many cases, a policy will not be owned by an individual, but rather by a large pool of investors. Tapping into the accumulated value of a policy can make a big difference in the quality of life that the policyholder can enjoy. The Bible encourages believers to have compassion on each other. "Finally, be ye all of one mind, having compassion one of another, love as brethren, be pitiful, be courteous." (1 Peter 3:8)
As with any business deal, there are certain precautions that a policy holder should observe when deciding to sell life insurance. There will usually be fees and commissions involved in these sales. A policyholder should make sure that they are aware of all fees in advance. If the fees seem unreasonably high, the seller may wish to shop around. There are few regulations that govern these contracts, which is all the more reason for a seller to be careful and cautious when seeking out deals of this nature.