Selling un-needed life insurance policies in the secondary market is now considered mainstream. It is a noteworthy development when class action lawsuits against life insurance companies are brought by policyholders. Should you sell an un-needed or unwanted life insurance policy? Most qualified sellers are happy to learn about the benefits of selling their policy in the secondary market. It pays to seek the guidance of a professional when dealing with life insurance matters. Selling an un-needed life insurance policy in the secondary market is known as a life settlement transaction.
Unsure about it? Ask your CPA or tax attorney about life settlements. Those with life insurance experience are advocates. I advise potential sellers to only work with insurance professionals to help maximize the value of an unwanted or un-needed life insurance policy. The right professional will make you aware of issues such as potential income taxation.
Selling un-needed life insurance policies is all about the value.
To determine the value of a policy you are considering selling, potential buyers need the following information:
- The required premiums to keep the policy inforce to life expectancy.
- The type of policy and its terms.
- Your life expectancy which is measured by an independent, 3rd party specializing in this practice.
- A detailed history and understanding of your current health and past health.
With this information, you should get initial offers. Typically, there is minimal value for policies owned by people under the age of 70. If there are health considerations leading to a shorter life expectancy, that may change the numbers in your favor. I recently helped a 77 year old woman sell a $2,000,000 policy she purchased at age 54. Because of previous medical history, she received a bit more than $400,000, net. Some clients I’ve helped have only received offers of 4 to 5 percent of the face amount.
If you have a policy you may no longer need or want, there is no downside to knowing its value.