WHY SELL A POLICY? Or, WHEN SELLING A POLICY MAKES SENSE
In my last blog I discussed Viatical Settlements for people living with a terminal illness. When someone gets seriously ill, his or her expenses go up and their income goes down. Having the option of selling a policy by utilizing a viatical settlement is a resource that many have found life enhancing when they need it most. But what about people who are older and have policies they no longer need or want? That’s when a Life Settlement might provide a better option that either surrendering the policy for cash value or simply letting it go altogether.
There are many reasons someone might want to sell a policy other than the need for cash due to a terminal illness.
It’s a fact that more than 80% of all life insurance policies either lapse or are surrendered for the cash value. When this happens, the insurance company never pays the death benefit yet gets to keep all the premiums paid.
So why would anyone pay premiums for a life policy for many years then simply let a policy go?
Perhaps the reasons for getting the policy in the first place have changed or no longer exist. A spouse passes away, a mortgage is paid off, the kids have graduated college and are successful on their own…
When life insurance is deemed no longer needed, rather than simply letting the policy go, the owner might want to look into a life settlement if the insured is over 65.
What happens when premiums get too expensive to pay? This is an example of what might prompt someone to look into a life settlement.
More and more, I get calls from grown children who are now faced with caring for aging parents, who are perhaps not in good health. Maybe they are in a position where the parents are in need of specialized medical care, home care or assisted living care. Where will the money come from to provide for the parents needs? If they have a life insurance policy, a life settlement may be the answer and should be looked in to.
In a business situation, a Key Man policy is an insurance policy taken out by a business to compensate that business for financial losses that would arise from the death or extended incapacity of an important member of the business. Key Man policies can often be sold when a key man retires or leaves the business.
It needs to be noted that not all policies can be sold, nor is selling a policy always in the best interest of the family or for the situation. A life settlement specialist can help give you the information and explain the options so that you can come to a knowledgeable, educated decision.
What kind of life insurance policies can be sold?
Universal Life policies are always preferred but most any policy can be sold, provided it meets certain requirements. Surprising to most, term policies can often be sold. However, it’s important that the policy be convertible.
A future blog will go into preferred types of policies to sell in more detail.