Selling a life insurance policy is a big decision, and it’s one that many seniors and their families may not have considered. However, by selling a policy, it’s possible to unlock its value and turn it into a valuable asset that can help fund retirement, pay for medical expenses, or cover other financial needs. While the process of selling a policy may seem overwhelming at first, it doesn’t have to be. By following a few simple steps, seniors and their families can navigate the process with confidence and ease. In this guide, we’ll walk you through the steps you need to take to sell your life insurance policy and help you make the most of this important financial asset.
Simple Steps To Selling
- Evaluate the policy: The first step is to determine the policy’s current value and any potential cash surrender value, as well as any potential tax implications of selling the policy.
- Find a buyer: The next step is to identify potential buyers. Not every life settlement company is created equal. Consumers should ask themselves one question when considering a life settlement: Should I talk with a broker or a buyer?
- Obtain an appraisal: You will need to get an appraisal of the policy’s value from a licensed broker or provider to determine the value of the policy. Although direct buyers can settle transactions faster, they are not fiduciaries. A life settlement broker is a licensed fiduciary who works in the best interest of the client. Brokers save time by completing one application that is presented to multiple buyers (in an auction-like format) to achieve the highest offers. Wheras providers give only one price. Brokers ensure clients are treated fairly and get paid a commission if a seller accepts an offer.
Get a free appraisal in minutes using our ValuLife™ app for iOS and Android.
- Negotiate the sale: Once a buyer is found and the appraisal is completed, it’s time to negotiate the sale. This may involve negotiating the sale price, terms, and considering any/all potential tax implications. Do not go alone! Ask a licensed broker to protect your best interest.
- Complete the sale: If a deal is reached, the buyer will typically pay the seller a lump sum in exchange for the policy’s ownership rights. Once the sale is complete, the buyer will take over premium payments and receive the policy’s death benefit when the policyholder passes away. This process is similar to a real estate transaction and takes as long to close.
- Close out the policy: The final step is to close out the policy and remove the beneficiary designations. It’s important to consult with a financial advisor or tax professional to ensure that the policy sale is properly reported to the IRS. Money is securely deposited into an escrow account and the seller has 15-day free lookback if they change their mind.
Obviously, this is an overly simplified, step-by-step guide to selling a life insurance policy.
How To Prepare For A Life Settlement Appraisal
We recommend calling or completing our app before performing the following steps to save time. Our experience can identify quickly over the phone if you have something worth pursuing. However, if you would like to know what’s involved if you did have an opportunity see this list below;
- A copy of the life policy (digital PDF preferred but not required)
- A copy of the coversheet (includes the title policy, carrier, insured information, and issue date)
- A copy of the annual OR most recent premium statement (cost basis document is helpful)
- An illustration to age 100 with $1000 remaining on the guaranteed side (not needed for term policies)
- A PDF copy of medical records from the last 3 years (get from a primary doctor or digital portal and include medication list)
What To Expect During The Appraisal
Working with a life settlement broker is pretty basic. A quick review of the insured’s situation and policy will determine the qualification status. If an insured qualifies for a life settlement, a few signatures are needed to access med records (HIPPA), Life Release (illustrations/policy details), and Disclosure (what to expect). After signatures and the above information are collected, the application process begins and is presented to multiple buyers for real offers an insured can accept, reject or counter.
Final Thoughts
By selling your life insurance policy, you can receive a lump sum of cash that can be used to fund retirement, pay for medical expenses, or cover other financial needs. Remember to evaluate the policy, find a buyer, negotiate the sale, and consult with professionals to ensure that the process is completed properly. With these steps in mind, you can turn your life insurance policy into a valuable asset and secure your financial future. Don’t wait any longer, start exploring your options today!
