As you age, you might find the need for life insurance begins to fade. You might want to exchange your policy for cash and lose the premium payments. But can you sell a life insurance policy after you buy it? Find out more below.
Can You Sell Your Life Insurance Policy?
You can sell a life insurance policy in a process called a life settlement. Basically, when you sell the policy, you get a cash payout and the benefit of no longer having to pay the premium. What you give up is the death benefit associated with the policy.
This can be profitable for the entity or person you sell to because they receive the death benefit when you die. You probably get much less than the face value of the policy when you sell because the buyer wants to make a profit. However, you benefit because you get the cash in hand now and don't have to keep paying the premium.
How Does Selling Your Life Insurance Policy Work?
Usually, you sell a life insurance policy through a broker. They find you an investor. You can usually only find an investor when you're older than 65. This is because the buyer doesn't see a return on their investment until you die. This is also why you can typically get more money for your policy the older you are. You’ll also have better luck the higher your policy is valued, as a bigger life insurance payout is a better investment for someone.
When Should You Sell Your Policy?
Selling your policy makes the most sense when you no longer have anyone who depends on you financially or any outstanding debts. When your kids are all grown and independent and you don't have any kind of partner who relies on you for money, life insurance becomes less important and you may want to just convert it into cash. You won’t have a premium anymore, so you’ll have more money to spend on enjoying life. Since you’ll get the most for your policy the older you are, it also makes sense to sell as late as possible.
It's definitely possible to sell a life insurance policy. Since life insurance can be a complex topic, though, you may want to talk to an insurance agent for your financial advisor before you make a move.