Can You Sell Your Term Life Insurance?
Yes, you can sell your term life insurance policy to a third party. This transaction is called a life settlement and allows you to collect a cash lump sum in a matter of weeks. The main caveat is that it needs to be convertible into a permanent life insurance.
To understand the process, we must define those types of life insurances. A term life insurance is limited in time (10, 20 years), meaning that if the policyholder dies within the time limit, the death benefit will be paid to the beneficiaries. Additionally, you cannot borrow against it since term life policies do not build up cash value. This explains their lower premiums.
On the other hand, a permanent life (or whole life) insurance has no time limit. They are usually more expensive, but they have other benefits such as investment options and a change in your health status will not affect its viability.
Investors are usually more interested in permanent life insurances because it eliminates the risk of the policy lapsing out, which would not generate any return on investment. They will also investigate three main factors to make an offer on a policy: the death benefit, the premium cost and the policyholder’s health status.
The good news is that most term life insurance policies can be convertible into permanent policies. Such a modification is called a “rider” and it would make your policy easily sellable. You can contact your insurer to learn more about riders. It is important to know that the policy needs to be converted by a certain age (65 to 70 years old). Some insurers will also let you add a rider without a medical exam which can be financially beneficial if you have a health condition.
Finally, there are some exceptions to the rule based on the policyholder’s health status. If they are affected by a serious illness and have a limited life expectancy, some investors may consider purchasing a term life insurance policy.
At Cedar Life Settlements, we understand that this can be hard to navigate on your own. It is normal to have questions when you are trying to sell your term life policy.
We offer complementary guidance and we will be happy to review your life insurance policy to provide you with the best option. Fill out our form here to contact us. You can also get an instant estimate using our custom built life settlement calculator.
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