Selling Your Life Insurance Policy – Frequently Asked Questions.


What is a life insurance policy settlement? Simply put, selling a life insurance policy to a third party is known as a life settlement. In exchange for your policy, you will receive a lump-sum of cash. Or, some people choose another arrangement allowing them to share in a smaller portion of the proceeds at death, without paying further premiums.

What is the ideal age to sell a life insurance policy? Typically, you should be 70 or older. There are exceptions because some people under 70 have significant health issues. Buyers of these policies are seeking people with a significant health change since the policy was issued. The best thing you can do is speak with a life insurance professional who can guide you through the process of determining if your policy has value.

Is a term life insurance policy eligible for sale?
Yes, but not all of them. It depends on the specifics of your policy, including its conversion option, which we can determine in a brief phone call. You should be 65 or older with some decline in health since the policy was issued. Most buyers are not interested in policies less than $100,000.

What are the special requirements to sell a term insurance policy?
Most life settlement buyers want term policies that are convertible to permanent insurance. Therefore, being able to keep the policy inforce for life with a conversion option, is necessary for these buyers.

When does the conversion privilege on my term policy expire?
The conversion option varies in each policy, even policies issued by the same company will have different conversion options. Some limit the conversion period to a number of years while others may impose a maximum conversion age.

When should I begin to convert the policy if a conversion is necessary?
Selling a policy involves getting medical records, in-force illustrations, a life expectancy analysis, an offer and the closing. In addition, a term settlement usually involves a conversion, first. Because the entire process can take 3 to 4 months, it’s best to get started 4 to 6 months prior to the expiration of the conversion privilege. Each time you review your existing life insurance portfolio, it is wise to consider the options to sell.

What are the alternatives to selling an unwanted policy? If your life insurance policy is determined to have market value to a 3rd party, it very well may have value to children or grandchildren. Depending on your circumstances, there are methods to help your family retain the policy and they are often worth considering. In a rush to sell a policy, these alternatives are often overlooked.

Can I sell part of my policy and keep part of it for personal use?
It depends on the policy and the company that issued it. Some insurance companies do not permit a policy to be split for a life settlement. It is worth exploring.

What happens to the cash value in my policy if I sell the policy? When there is cash value in a policy going to the settlement market, it is a good idea to discuss the many options to maximize its value before the sale occurs.

Are there income taxes on the sale of a life insurance policy? It depends. There are many factors and each situation is unique. Of course, income taxes will not exceed the lump-sum, if there are taxes. They are certainly a consideration to factor into a decision to sell.

To help you with the possible sale of your policy, I offer a complimentary consultation by phone. Please email me or fill out the contact form on this page and I will contact you shortly. You can call me directly at 561-869-4500.

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Ted Bernstein

Dedicated to helping people create the ultimate retirement security and protection plan to safeguard their families and businesses. I stress guaranteed income solutions, indexed annuities and state of the art wealth preservation strategies. As the innovator of life insurance products without commissions, my recommendations are impartial, objective and always in the best interests of my clients.

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