Maybe you purchased your life insurance for a death benefit years ago, but times have changed. You will retire, and your life would be without a paycheck that could be different and hard to survive.
If so, you can decide to give up your universal life insurance plan. It enables you to save money by not having premiums to pay, and you may also get money from your policy. So it would be a great idea. Still, if you are confused and want to know in-depth about selling your insurance policy, this blog post is for you. In this article, we will discuss all the possibilities and reasons for selling a policy, along with some alternative options.
What are the reasons to sell your life insurance policy?
Various financial situations or life-changing circumstances entice you to sell your universal life insurance policy. Below are some common reasons to consider selling your insurance plan:
- You will no longer afford the premium payments being jobless or retired.
- Your expenses may increase, and you have less disposable income.
- You need money to cover a huge unexpected expense.
- Your kids are grown now and financially independent.
- Estate taxes are no longer a concern.
- Your policy is about to end.
Most of these reasons bring you to a situation where you no longer need or want the policy. So it’s better to sell it rather than let it lapse. By doing so, you will get money from the sale and some room in your monthly or annual budget. And you can use this money towards other priorities like improving your current lifestyle etc.
How to sell your universal life insurance policy?
When you decide to sell your life insurance policy, you must be familiar with life settlement transactions and the regulations that stimulate the process. Check out your local insurance department for information about the procedure, licensing needs, and potential scams.
After that, you must decide whether to use a broker. A licensed life settlement broker will answer your queries, look out for your interests, pull quotes, and handle negotiations. However, he will charge for these services. Another option is shopping around and comparing options to avoid this fee.
Instead of whether you hire a professional, the entire process may need the same basic steps:
1- Application: after collecting quotes from various companies, you must complete an application for each. You have to grant the settlement company permission to get information about your plan and health as part of the procedure. Moreover, you may also have asked to give some additional information or documentation.
2- Documentation: once your application is submitted and you grant the required permissions, the underwriters will collect information. They will contact your insurance company to provide details about your policy, including death benefits and premiums payment.
3- Assessment: after reviewing the relevant information, the underwriters will check the market value of your policy. They will evaluate whether the policy is a good investment according to its value and the opinion of medical experts regarding your health.
4- Offers: assuming your policy is suitable for purchase, the settlement company will give you an offer. It’s up to you; you can either accept or decline it. However, comparing multiple offers from different companies is recommended before making a deal final.
5- Close the Deal: when you accept the offer, the settlement provider will send a closing package for you to review and sign. Once you return the signed documents, your insurer will be notified of the transaction. The policy’s ownership will change, and you will get the settlement funds.
From start to finish, the entire process may take about 60 to 120 days. The exact timing will depend on how steady third parties, including your insurer and health care providers, respond to requests for the information.
Should I surrender my universal life insurance policy?
It’s not advisable to surrender your universal life insurance policy because selling it gives you a far greater value. Surrendering your policy is just like leaving money on the table. So if you are considering this option, at least reconsider selling as an alternative to see how much you can get via a life settlement. Furthermore, you can also consult a professional insurance expert to get help with it.
Is there any alternative rather than selling a universal life insurance policy?
One of the most common reasons for selling an insurance plan is the need for money. However, if you need quick money, there might be some alternatives you want to look at. Some options you can consider are:
- You can claim your insurance money while you are still alive based on the type of your policy and insurance company.
- Another option is surrendering the policy. It may not result in much money, but it makes access easy to some quick cash regarding the surrender value. When you do it, your future premium payment requirements will end simultaneously.
- Taking a personal loan might help you. If you are stuck in a tight spot, getting a loan from a bank is an easier option, although you have to pay interest.
In conclusion, you can sell your universal life insurance policy, but whether you should is complex due to financial implications and potential legal issues. Before making a final decision, it is better to review the alternatives. In most cases, converting, adjusting, or replacing the policy makes more sense than selling it.