Life insurance is designed to provide a beneficiary with a designated amount of money after a person’s death. But while life insurance policies can be beneficial, sometimes people need money while they’re still alive.
If someone is in their elderly years or deemed terminally ill, they may instead consider selling their life insurance policy to get cash to use towards healthcare costs and other needs. But how does selling a life insurance policy work?
Viatical settlement vs. life settlement
If someone does decide to sell their life insurance policy, they need to do so with a reputable buyer, so check websites like sellmylifeinsurancepolicy.com to look at offers. Rather than taking out loans or refinancing a mortgage, you can look for companies that will give you a reasonable amount for your policy. You get cash immediately, and in return, your beneficiaries won’t receive the life insurance payout after your passing.
The two main groups of people who might consider selling their life insurance policies are terminally ill patients and the elderly. If someone is terminally ill and given fewer than 24 months to live, they may qualify for a viatical settlement, which is not taxable. People who are not terminally ill but are still looking to get cash for their policies would receive a life settlement, which is taxable.
Understanding the process
So, how exactly does selling a life insurance policy work? Fortunately, this process is fairly simple. First, you should have your life insurance policy appraised in order to determine exactly how much they can get for it. After the appraisal, policy holders need to find a buyer.
As previously stated, finding a broker to connect individuals with buyers is a great option — trying to find a buyer without professional help can be complicated, and you may end up not getting the whole amount that they could have. Once you find a company to connect you with a possible buyer, an offer can be made (usually for less than the policy will eventually be worth) and the sale can take place.
The buyer will then give the seller a lump sum for their policy and they’ll then have access to that money. Meanwhile, the buyer will eventually collect on the life insurance payout after the seller’s passing.
Reasons to sell a life insurance policy
There are many reasons why people may choose to sell their life insurance policies. For someone who is terminally ill, receiving cash for their life insurance policy can help them cover long-term care costs. While it may be nice to leave money to a beneficiary, avoiding the financial burden of medical care can be more beneficial.
Additionally, retirement or estate planning can be made possible if someone sells their life insurance policy. A senior citizen may not have a strong enough income to cover their expenses, and having a lump sum of cash can help cover costs. If someone doesn’t have a beneficiary and doesn’t have to worry about leaving money to anyone after they’re gone, they can instead enjoy their money and use it as they see fit.
All in all, selling a life insurance policy can be a smart move under the right circumstances. From covering expensive medical bills to helping to pay for retirement fees, receiving cash for a life insurance policy can help lessen financial burdens.
To read more on topics like this, check out the health category.