If you have a term life insurance policy, then you must be wondering, since the cash value accumulation is not there, can I sell my term life insurance policy? Why not? If you are stuck with a term insurance policy, then you can sell this policy for some lump sum to a buyer, often known as a Life settlement company.
Don’t get confused, in this article, we will deeply understand the scope and norms for selling term life insurance policies with confidence.
What Does It Mean to Sell a Term Life Insurance Policy
Selling a term life insurance policy is known as a Life Settlement. This means you are selling and providing all control to the buyer or the life settlement company.
The buyers are general individual investors or companies. The policyholder can sell a term life insurance policy in exchange for a lump sum, but the money will still be less than the coverage benefit amount. After the sale, the investors will pay the premiums and get full control over your insurance policy.
However, as we know that term life insurance does not support cash value accumulation, and because of that, it is not considered a viable asset to invest in. So, the question “Can I sell my term life insurance policy?” is still on the table.
Can I Sell My Term Life Insurance Policy?
Yes, but there are always some conditions that need to be covered. In general, before selling a term life insurance policy, the conversion feature into a permanent policy should be there. A convertible term life insurance policy allows the buyer to convert it into a whole or permanent policy, so that the cash value feature can be available.
The life insurance policy with cash value features makes it a good marketable asset, and if it is not convertible, then selling a term life insurance policy will be nearly impossible.
How Can I Sell My Term Life Insurance Policy?
If your term life insurance policy is eligible with all features, then you need to follow the steps mentioned below:
- Policy Review and Conversion
First, you need to consult your insurance provider to convert the term insurance policy into a permanent policy plan.
- Eligibility Check for Life Settlement
You need to check the requirements of the buyer. Most of the buyers look for a policyholder aged over 60, the coverage amount must be at least $100,000, and possibly having a chronic illness that reduces life expectancy.
- Get a Life Settlement Broker or Provider
Consult with a buyer or life settlement company that is licensed by the respective insurance department of the state, like the Texas Department of Insurance.
- Receive Offers and Complete the Sale
Once you find a reliable buyer, negotiate for the lump sum you will exchange for the insurance policy, and go for the sale.
Is Selling a Life Insurance Policy Worth It?
Selling a Term Life Insurance policy depends on your goals and requirements. Here are some pros and cons that help you in determining your needs and advantages.
Pros:
- You will get actual cash and can use it for sudden expenses.
- Premiums will stop, and you don’t need to pay anymore.
- Unused asset gets monetized.
Cons:
- Your beneficiary will not get the death benefits.
- The amount you receive in exchange for the policy will always is less than the coverage amount.
- Settlement can be taxed based on the amount you receive.
First, you need to rethink and compare the pros and cons of selling and not selling the term life insurance policy.
Can I Sell My Group Term Life Insurance Policy?
Group term life insurance policies are not eligible for sell because it is not owned by a single policyholder. Also, this policy cannot be converted into a permanent policy and terminates when the employee ends or leaves the job. A group life insurance policy is not like a term life insurance which only owned by a single person.
The group term life insurance policy is rarely convertible into an individual whole life policy, and it is likely to be unavailable for sale.
Selling a Term Life Insurance Policy If You Are Under 65
Can I sell my term life insurance policy? -This concern is now understood, but here is one more question that needs to be focused. Which is “Can you sell your life insurance policy if you are under 65?”. Yes it is possible to do this but after the age of 65 years, the need of a life insurance is maximum. This is because with time the immunity reduces and with this life expectancy reduces.
So, after considering all the factors, pros, and cons take best decision that offer best results. Mostly the buyer prefers older policyholders of more than the age 65 years of age with at least $100,000 of coverage amount. The sellers with low life expectancy will likely get the best deal in exchange for their insurance policy.
How Much Can You Make Selling Insurance Policies?
It is estimated that you can expect around 10% to 25% of the face value of the insurance policy. This percentage may depend on your health, term period, coverage amount, and the policyholder’s age. As mentioned above, the buyer mostly prefers applicants of older age and higher coverage amounts. In general selling a term life insurance policy is not recommended.
This is because the main of life insurance plans is to provide emergency funds in the situation where the policy holder dies. Selling a policy will prevent the beneficiary or the family members to get the funds after the policy holder’s death.
Conclusion
Selling a term life insurance policy is possible, so the concern “Can I sell my term life insurance policy?” is resolved with full details. Possible, but under some conditions and eligibility. The term life insurance policy must have the feature of conversion into a permanent insurance policy and have at least $100,000 of coverage amount.
Usually, most of the insurance buyers prefer to go for the older policyholder with chronic illnesses, which makes their life expectancy low. So, don’t rush to make any decision. Talk to your insurer and the buyer, understand your needs, and move precisely to prevent losses.
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Frequently Asked Questions
Can term insurance policies be sold?
Term life insurance can be sold, but first it needed that the insurance policy must be convertible into a permanent policy that facilitates cash value accumulation.
How much can you make selling term life insurance?
It depends on the buyer and your health, coverage amount, and age. Usually, you can make around 10 to 25% of the face value of the insurance policy you have.
Can I sell my $50000 term life insurance policy?
No, it is required that the coverage amount should be at least $100,000, so selling a term insurance policy of $50,000 will be difficult or impossible.
Can you cash out term life insurance before death?
No, a term life insurance policy doesn’t have the feature of cash value like other policies. So, you cannot cash out of the term life insurance policy. The only way to cash out is to sell the policy.
Can I sell my term life insurance policy for cash?
Yes, it is possible to sell a term life insurance policy in exchange for money from a buyer.
