One of the perks of having a life insurance policy is that you can convert it into cash when there is a need. While it may seem pretty simple and straightforward, it can be more complicated than a mere transaction where you get cash in return. This is why before selling life insurance policy, there are certain things you need to know. First things first, you should know what exactly happens when you sell and after you sell your life insurance policy.
First, your life insurance policy is analyzed to see if it qualifies for a life settlement. When it meets all the criteria, you get to sell your life policy in exchange for cash. Once you sell your life insurance policy to a buyer, the buyer has to pay for premiums until the seller passes away, then the buyer gets the death benefit. There are a number of steps involved in the transaction for a life settlement. These steps would be explained in detail when you choose to work with a licensed life settlement company or broker.
THINGS YOU SHOULD KNOW
When selling life insurance policy, it would be helpful to know certain things so that you can go about the whole process in a proper fashion, being completely aware of what you’re required to do. Here’s a list of things you need to know.
- First, you need to figure out what could your life insurance policy be worth. There are chances that your life insurance policy might not have so much value in the market. It shouldn’t come off as a surprise when that happens.
- When you sell your policy, you don’t get cash that is equivalent to the value of the death benefit.
- If your policy does not qualify all the set criteria, you can’t sell it.
- If you plan to work through the process of selling your life insurance policy with the help of a broker, know that brokers charge a commission.
- When selling your life insurance policy, you would have to deal with income tax related calculations. Thus, if you seek professional help from a tax advisor, it can simplify tax-related steps involved while selling a life insurance policy.
- There are different types of life settlement options. You should educate yourself about traditional life settlements, retained death benefits, hybrid settlements, and viatical settlements. This will help you figure which type of life settlement best suits your case. If you don’t do your homework, you might end up missing a life settlement option that would fit perfectly for your case and requirements.
WHILE SELLING YOUR LIFE INSURANCE POLICY
It’s natural that when you sell your life insurance policy, you will try to get the most money out of it. To make sure you strike the right deal, take a look at the following steps you can take to ensure a fair deal.
- As already mentioned multiple times, before you sell your life insurance policy, there are certain criteria it should meet. Some of these rules are regulated by the state where you live. So, before you sell your life insurance policy, make sure you have a clear understanding of what these criteria are and if your policy meets the regulations laid by the state.
- Settling down with the first offer is the biggest mistake you could make. Since there is no set value for policies when sold in exchange for a life settlement, each buyer may have a different price to offer. Talk it out with various buyers so that you can negotiate and finalize the most profitable deal.
- While a life settlement company would walk you through the entire process of the transaction when selling your life insurance, there are other intricate steps that involve tax liability. This requires help from accountants and tax advisors so that you’re not oblivious to anything.
- Yet another important thing to assess when selling your life insurance policy is if you have any debts. This is because, in case of debts, your creditors may have a claim to whatever money you receive after you sell your life insurance policy. If you have debts, talk to a financial advisor and see what you can do about it when selling life insurance policy.
Selling life insurance policy for the right amount of money involves you having the right information needed and working with professionals who can help you in each step. After all, it only makes sense to follow all the steps the right way when you have been investing so much in the premiums.