When Should You Sell Your Life Insurance Policy?
You may have paid premiums for years, but there might come a time when you no longer need the coverage that life insurance provides.
- Your children are grown and no longer depend on you financially.
- You are retiring or selling your business and the business no longer needs the policy it has been paying for.
- You are retiring, and your family can depend on your retirement accounts to provide income if you pass away.
Tips for Selling Your Life Insurance Policy
- Find a knowledgeable broker. You could sell your policy directly to a life settlement provider like the ones you see on late-night TV ads. A broker, however, works with the life settlement buyer on your behalf to help you receive the best possible offer. A good broker presents your policy to several potential buyers, not just one. Conversely, when you sell directly to a settlement provider, you’ll likely get just one take-it-or-leave-it offer. The right broker can put your policy up for auction with a dozen or more qualified and interested buyers. Licensed brokers can be difficult to find – Monarch’s staff includes one of only thirteen in the entire state of Wisconsin.*
- Talk about fees and compensation upfront. You might not be able to get a precise dollar amount until the policy is sold and the proceeds collected, but still – ask for the fee or compensation schedule up front in writing. It may be a percent of the death benefit, gross offer, or the net value created by the sale, which are all quite different from each other. Also be sure to confirm who pays for any documents required for your case, such as medical records or life expectancy reports.
- Speak with your family before selling. Just as with any part of your estate plan, be sure your family members know that you are taking steps to sell your life insurance policy. This is particularly important for beneficiaries of the policy since they will no longer be able to count on receiving the death benefit after you pass away. Monarch’s life settlement professionals are happy to talk with family groups about the reasoning behind any life insurance-related decisions.
- Educate yourself on the process. Life settlements can be complex, but we can help you figure out whether it’s a good idea for your situation. A couple of key things to remember:
- Be patient. Selling by auction will take longer than selling directly to a provider, but that’s the idea! We give potential buyers one to two months to generate excitement around and bid on each settlement case. Our goal is to maximize the amount you receive, and that can take time. Tacking on one to two months for the application process and the same for closing, we expect a settlement transaction to take five to eight months total.
- And yet, once you receive a settlement offer, time is of the essence! The offer is based information at a point in time. It can expire or the buying company may enforce a deadline for turning the insurance policy and all pertinent agreements over to them. Your broker can help make sure you are on top of requirements and deadlines.
- Prepare for questions. Buyers are looking for enough information to decide whether your policy will be a good investment: the specifics and value of the policy and your current health status, among other things. Monarch obtains much of this information on your behalf – with your permission – then packages and presents it to the marketplace.
Life Insurance Settlement FAQ
What kinds of life insurance can be sold?
Most types can be sold, including whole life, universal life, variable universal life. Term insurance may also be eligible, particularly if it can be converted to permanent insurance.
Is selling your life insurance policy a good idea?
You will want to weigh the pros and cons. If your policy sells successfully, you will likely receive a cash amount higher that what you’d receive by surrendering the policy, but lower than what your beneficiaries would receive upon your death. It’s a good idea to think through your needs and the needs of your business or loved ones before selling. A life settlement broker can help you do that.
How much can you sell a $100,000 life insurance policy for?
The amount you might receive depends on many factors in addition to the face amount: the amount of value currently in the policy, the estimated length of time before the buyer would collect the death benefit, among other things. With information about the policy and the person it insures, we can provide our best estimate of the amount the policy might sell for at auction.
Find Your Life Settlement Broker at Monarch Insurance Partners
Have questions? Schedule a phone call with our licensed life settlement broker, Brad Mueller, by clicking here. Visit our website at monarchinsure.com.
*Source: https://www.statebasedsystems.com/solar/index.html, report generated February 27, 2023.
Valmark Securities supervises all life settlements like a security transaction and its registered representatives act as brokers on the transaction and may receive a fee from the purchaser. Once a policy is transferred, the policy owner has no control over subsequent transfers and may be required to disclosure additional information later. If a continued need for coverage exists, the policy owner should consider the availability, adequacy and cost of the comparable coverage. A life settlement transaction may require an extended period to complete and result in higher costs and fees due to their complexity. Policy owners considering the need for cash should consider other less costly alternatives. A life settlement may affect the insured’s ability to obtain insurance in the future and the seller’s eligibility for certain public assistance programs. When an individual decides to sell their policy, they must provide complete access to their medical history, and other personal information. Each client’s experience varies, and there is no guarantee that a life settlement will generate an offer greater than the current cash surrender value.
Securities offered through Valmark Securities, Inc. Member FINRA, SIPC. 130 Springside Drive, Akron, Ohio. 44333-2431. 1.800.765.5201. Monarch Insurance Partners is an entity separate from Valmark Securities, Inc. The information contained has been derived from sources believe to be reliable, but is not guaranteed as to accuracy and does not purport to be complete analysis of the material discussed, nor does is constitute an offer or a solicitation of an offer to buy any securities, products or services mentioned. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation.