Selling Your Life Insurance for Cash

Life insurance is one of those things you know must be dealt with, but you don’t really want to have the hassle. It is somewhat like doing taxes each year. Given this reluctance to investigate the subject, it is hardly a surprise that most people aren’t aware of a concept known as the life settlement.

What is life insurance? It sounds like a simple question and most people would give a simple answer – it is insurance that pays out a significant amount of money when the person insured dies. This is absolutely correct, but there is also another answer. Life insurance is a product that can be bought and sold. This is where the concept of a life settlement comes into play.

A life settlement is simple the sale of a life insurance policy to a third party. That party agrees to take over the payment of premiums, however, they also obtain the right to select the beneficiaries of the policy [who gets the payout]. What do you get for this? A lump sum cash payment that can be represented as a percentage of the face value of the policy. For instance, a policy that pays out one million dollars on the death of the insured might be sold for $100,000 or more.

Okay, what’s the catch? The catch is your age. The investors are buying the policy because they believe it will pay out relatively soon and provide them with a nice return on investment. Yes, you read that correctly. They are buying because they think the insured will pass away soon. Given this, it probably isn’t a surprise to learn that most life settlements involve insured individuals who are 60 or older. The chances of a 70 year old moving on are much greater than a 25 year old, although my college years might refute that!

Why would you, the policy holder, sell you policy? There are many reasons, but two come to the front. The first is you can’t afford the premiums anymore. The second is you need cash for general bills, hardly a surprise in this economic environment. There are others as well, but the point is still that selling the policy will raise cash that you can use.

Entering into a life settlement agreement is an important decision. You should only do so with the help of experienced professional who can explain the full implications of doing so.

Thomas Ajava writes for LifeInsuranceLIfeSettlment.com - your online resource for independent life insurance life settlement representatives.