Did you know that it is possible to sell your life insurance policy for cold, hard cash? The process is called a 'life settlement' and it could mean big money is in your future. While this may be a great option for some individuals, selling one's life insurance policy is not for everyone.
What happens is that you sell your life insurance policy with all of its benefits, premiums, and rules to a third-party buyer or an insurance agency other than the company supplying the life insurance. They will then pay you cash for an agreed-upon amount. The third-party buyer will then continue making payments on your life insurance until you pass away, at which time they will collect the full value of your life insurance policy.
There are many pros and cons of selling one's life insurance that should be considered. Let's start with the cons.
No Money for Beneficiaries. One of the major downsides of selling your life insurance policy is that when you do finally pass away there will be no money awarded to your family members or beneficiaries. This may put a financial strain on them to pay for your funeral or final expenses. However, if you do not have anyone that you want your money to go to, this is really not a con at all.
Taxes. If you get a bulk payment of money it is likely that you will need to pay taxes. This should be factored into your decision, since instead of going home with around $100,000 you may only take home 85% or less.
You No Longer Need To Pay Premiums. One perk of selling your life insurance policy is that you will no longer be required to pay that annoying monthly premium that has plagued you for years. Eliminating this monthly bill may help with cash flow, meaning that you will likely have more money to use on regular expenses throughout the month.
Retirement Money. Obviously the biggest advantage to selling one's life insurance is the ability to use their life insurance policy to, well, live. Instead of paying money every month to allow others to live more comfortably, you yourself can live the life you have been working toward. Some people work their whole lives and never earn enough to retire. Selling one's life insurance offers them the flexibility to pay for their own expenses and still have extra to enjoy the time they have left.