Should You Sell Your Life Insurance?

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By Jacob Maslow

Life insurance is booming. The United States population is aging rapidly, with 50% of the population going to be 50 years of age or older this year. Preparing for one’s demise is a big business. MetLife (MET) stock is up 15% in the trailing 12-month period. Prudential Financial (PRU) stock rose over 25% during the same time span.

Life insurance stocks have rallied in the past year. The industry expects to remain strong as the population continues to age, buying more premiums along the way.

Selling your life insurance is also an option.

Life settlements, often taken out by people 65 or older, are able to sell their life insurance policy when they either no longer need life insurance or cannot afford their premiums any longer. If you want to  sell your life insurance, life settlements are an option.

Individuals or institutional investors often pool life settlements together. Providers or brokers handle the settlement transaction, with brokers selling the policy to the highest bidder. Brokers work on the behalf of the policyholder to ensure they receive the best price for their settlement.

Providers may also purchase policies, and this option eliminates broker fees.

A final investment in yourself, the idea is that a broker or provider will ask for your medical records and try and determine your life expectancy. The buyer will become the new policy holder and will pay your premiums. Sellers can expect to check in with the buyer periodically so that the buyer knows if the seller is still alive.

The buyer receives the insurance policy payout when the seller dies.

Selling your life insurance means that no money is given to your descendants. Broker commissions can account for 30% of the settlement. Taxes will also need to be paid as either capital gains or income taxes. If you rely on public assistance, you may not be able to receive assistance any longer following the settlement disbursement.

Buyers often seek policyholders that have a policy value of $100,000 and are 65 or older. A person with series medical or health issues that is younger may also be an acceptable seller.

Life settlements make sense when life circumstances change for the policyholder. Policyholders who have divorced, can no longer pay for their premiums or have no beneficiary to leave their money to may opt for a life settlement to enjoy their money while they’re alive.

Settlements are lower than a policy’s value, but it’s money a person can utilize during their life.

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