How to Cash in on Your Life Insurance
The needs of people change overtime, and while life insurance may have been necessary at one point, it may make more sense to cash in on it now. The process is not complicated. You can do this through life insurance settlements or selling your life insurance policy. When you sell, the policy and its death benefits will be transferred to the buyer in exchange for money.
Why sell your life insurance policy
There are several reasons why it makes sense to cash in on your life insurance. Below are some of the most common reasons why people do it:
- You are in long-term care
- You need retirement funds
- You are critically or chronically ill and your policy has no option to access death benefit early or the access is less than what you could sell your policy for
- You cannot afford to pay the policy anymore and risk losing it
- You no longer need life insurance because you do not have dependents anymore
Selling a life insurance policy is a big decision. It is recommended to seek professional advice before making a decision. The last thing you want is to make a decision that you will later regret.
Other options apart from selling
Depending on your policy, you can still get money out of it without selling. For example, you can borrow from your life insurance tax-free without losing the policy. Some policies also allow you to cash your money if you are critically ill, or offer cash surrender where you can cancel the coverage in exchange for any accumulated cash value from the policy.
How much can you get from selling
Several factors determine how much you can sell your life insurance for. These include your age, the death benefit value of the policy, and the cost of premiums and how long you paid for them.
In general, the policy holder receives up to eight times more than the cash surrender value of the policy but payouts are as low as 21% of the death benefit value.
If you are really sure about selling your life insurance, it is possible to do it directly, but the process may be simpler if you work with professionals such as an advisor, a life settlement broker to represent you, and a life settlement provider. Make sure all the people you are dealing with are licensed so that you do not step into hurdles when cashing in on your life insurance.