If you need extra cash or if you have a life insurance policy you no longer need, there are alternatives to surrendering it for the cash value. One method that’s gaining popularity is to sell the policy outright. While this can earn you more money than you would otherwise receive, it’s important to understand how this process works. Once you learn more about it, you can decide if it’s right for you.
Getting Started
To begin the process of selling your life insurance policy, it’s essential to have it appraised. An appraiser will determine the resale value. This will help you determine how much you can ask for when you begin searching for a buyer.
Locating a buyer is the most challenging part of the process. If you’d prefer not to go through a lengthy search, you can do what most people do and sell your policy to a life settlement broker. In this situation, you’ll receive a percentage of the sale deducting the broker’s commission, but the broker may be able to negotiate a better deal on your behalf.
You should also be aware that you won’t receive the full face value of the policy. The highest you can reasonably expect is between 13% and 20% of the policy’s face value. Your broker may claim up to 9% of your payout. The money you do receive will likely be taxed, so be sure to account for that in filing your income tax returns.
Steps to Follow in Selling Your Policy
Once you’ve decided to sell, these guidelines can help you have a more successful experience.
Learn the Rules – There are plenty of regulations dealing with the selling of insurance policies. Some of these rules are established by the insurance provider, while other regulations are enacted through state law. Learning these rules in advance can help you avoid problems.
Field the Offers – If you take the first offer you receive, you may lose money. Buyers will offer a broad range of amounts, so wait to receive a handful of offers first. This will help you determine what you should expect to receive.
Discuss Your Plans with an Accountant – This will help you get a better grasp on your tax responsibilities after the sale. You should also discuss your debts with your accountant or a financial advisor. Creditors may have a claim to any funds you receive from your policy.
Sometimes, people find it difficult to maintain payments on a life insurance policy, especially when they’re living on a fixed income. Selling the life insurance policy may be the most desirable choice. However, if this is a step you’re considering, you should take the time to receive input from professionals to ensure this is the right decision for you.