New ways to cash in on your life insurance policyPublished 10:53am Friday, April 27, 2012
Dear Savvy Senior,
What can you tell me about life settlements? I have a life insurance policy that I really don’t need any longer and I’ve heard that selling it can produce a nice payout.
Interested In Selling
If you don’t need your life insurance policy any longer, are having a difficult time keeping up with the premium payments or could just use the money, a life settlement is definitely an option worth considering.
How it Works
A life settlement is the sale of an existing life insurance policy to a third party company for cash. Life settlements are typically best suited for people over age 65 who own a policy with a face value of $250,000 or more.
Historically, if an owner of a life insurance policy decided they no longer needed it, they would either let the policy lapse or turn it in for a meager cash surrender value. But now, with the life settlement option, you can actually sell your policy for two to three times more than the cash surrender value would be, but less than its net death benefit.
Once you sell it however, the life settlement company then becomes the new owner of the policy, pays the future premiums and collects the death benefit when you die.
How much money you can expect to get with a life settlement will depend on your age, health and life expectancy, the type of insurance policy, the premium costs and the value of your policy. Most sellers generally get 20 to 30 percent of the death benefit.