Four Ways to Sell A Life Insurance Policy
Life is just downright unpredictable; therefore, the knowledge that you can sell a life insurance policy should the need arise is quite a comfort. Life has never stood still. However, in these fast moving times it sometimes seems that you make a decision one day and before you know where you are you're having to change things. In no region of our lives is this more so than when you come to buy life insurance. Life insurance is an important financial asset. However, your needs at one stage of your life will not be the same as at another. What you require when you first marry is very different from what you need when you are approaching retirement.
Life insurance has two components: it has an insurance cover and an investment element. It is the investment element that allows an insurance policy to be sold.
Withdrawals
It may be possible to withdraw cash from your insurance policy. How much you can withdraw will depend upon the policy you have. Amounts vary from policy to policy and from company to company. This may be done in fixed or variable amounts, in one withdrawal or in several withdrawals over a period of time. The drawbacks with a withdrawal of cash are that the money you withdraw may be taxable, it may reduce the amount payable on death and may cause your premiums to increase.
Loans
A policy with a cash value will usually allow loans to be made. You won't need to qualify for the loan and there's no tax. However, it will be subject to interest and it will reduce the amount payable at death.
Surrender
By surrendering the policy you are cancelling it. You will get a cash payment but will have to pay a surrender fee, which can be high in early years. Tax may be payable and of course you lose the death benefit.
Life Settlement
With a life settlement you sell your insurance policy on what is known as the secondary market, usually to a life settlement company. The company will keep up the premium payments and receive the death benefit when you die. You can sell a life policy even if its cash value (ie its surrender value) is very small. You will receive a payment that will exceed the cash value but will be lower than the payment you would receive upon death. Generally, you will need to be at least aged 65 or have a life expectancy in the region of ten to fifteen years. Life settlements are relatively new.
We never know how our circumstances will change, but when it comes to life cover, there are a number of ways that you can sell a life insurance policy.
Life insurance has two components: it has an insurance cover and an investment element. It is the investment element that allows an insurance policy to be sold.
Withdrawals
It may be possible to withdraw cash from your insurance policy. How much you can withdraw will depend upon the policy you have. Amounts vary from policy to policy and from company to company. This may be done in fixed or variable amounts, in one withdrawal or in several withdrawals over a period of time. The drawbacks with a withdrawal of cash are that the money you withdraw may be taxable, it may reduce the amount payable on death and may cause your premiums to increase.
Loans
A policy with a cash value will usually allow loans to be made. You won't need to qualify for the loan and there's no tax. However, it will be subject to interest and it will reduce the amount payable at death.
Surrender
By surrendering the policy you are cancelling it. You will get a cash payment but will have to pay a surrender fee, which can be high in early years. Tax may be payable and of course you lose the death benefit.
Life Settlement
With a life settlement you sell your insurance policy on what is known as the secondary market, usually to a life settlement company. The company will keep up the premium payments and receive the death benefit when you die. You can sell a life policy even if its cash value (ie its surrender value) is very small. You will receive a payment that will exceed the cash value but will be lower than the payment you would receive upon death. Generally, you will need to be at least aged 65 or have a life expectancy in the region of ten to fifteen years. Life settlements are relatively new.
We never know how our circumstances will change, but when it comes to life cover, there are a number of ways that you can sell a life insurance policy.
Source...