This is one of the most frequent questions we get at Ovid. Here, we’ll take some time to answer the question and give you the information you need to decide whether you’d like to learn more about selling your life insurance policy for cash. Buying term life insurance policy.
First, it’s important to know that not everyone who owns a life insurance policy is eligible. The process, called Life Settlement , has certain criteria determined by investors that purchase unwanted and unneeded life insurance policies.
The majority of people who participate in a life settlement are over 70 years old or terminally ill. Their permanent life insurance policy has a face value of $100,000 or more. A potential investor wants to be able to pay a lump sum in exchange for a policy.
The ongoing premiums must be low enough that the investor can keep the policy in force without losing money until it’s time to collect the benefit when you pass away – meaning is the policy affordable for an investor to both give you a payout AND keep paying the premiums till you pass away.
The buyer of the policy will analyze your life insurance policy illustration to determine this – a document that shows the cost of keeping your policy in-force until maturity. You can get more information about eligibility for life settlements here.
When rising premiums become unaffordable, the policy owner may feel like they have to prioritize their current financial situation by letting the policy lapse. In many cases, a life insurance policy created as a safety net for a growing family becomes unnecessary when the kids are grown and self-sufficient.
Sometimes, policy owners can afford their life insurance policies but want to use the money for other purposes, so they choose to let their policies lapse. These are all valid reasons to part with a life insurance policy.
The rising cost of healthcare and the financial crisis of 2007 put many seniors in a financially uncomfortable position. A life insurance policy can provide a source of much-needed cash for people who need to pad their nest egg and prepare for medical care as they age.
No Longer a Need for Life Insurance
For instance, some policyholders originally purchased a life insurance policy to provide financial security for their children in the case they passed away, but today, their children have grown up and are financially independent. Other seniors have underfunded retirement accounts as a result of the 2007 financial crises and simply could use the extra infusion of money. Or, an aggressive life insurance agent sold you a policy that you didn’t really want in the first place, but ended up keeping.
Some policyholders have just built up enough wealth that they are “self-insurance”, which means they no longer really need the life insurance to pass an estate onto their beneficiaries.
Who Buys Your Life Insurance?
Small business insurance
Individual investors don’t purchase life insurance policies. Large institutional companies called Life Settlement Providers specialize in buying thousands of life insurance policies every year – and they are regulated by the state. Buyers look for a specific type of life insurance policy. Some prefer smaller policies and others have preferences about the insured person’s health status.
When you are considering the sale of your life insurance, we recommend to only deal with large, credible, institutional organizations. Be careful of smaller buying operations with poor reputations – remember, your life insurance is very personal.
All of these different buyers have a different process and each is looking for different kinds of policies to purchase. Some prefer to purchase large policies and some prefer small. Some prefer older insured persons and some prefer younger insured persons. It’s important to find a partner to help navigate these different buyers and make sure you get the best offer for your policy. Most of these large providers are on the Ovid exchange.
What Is Your Policy Worth to a Buyer?
Are Life Settlements Safe?
Every year, over $1 billion of life insurance is sold in the US life settlement market. Life settlements themselves have been around since the 1980’s and it is a heavily-regulated industry. Large institutional funds are the primary buyers of life insurance – they are called life settlement providers. Collectively, these life settlement providers buy thousands of life insurance policies and turn them into diversified investments for their own account or resell them to other investors.
Finding the right buyer is essential. Because of their extensive industry knowledge, Ovid has been able to match policy owners with investors willing to pay as much as 50% of the policy’s face value.
Ovid matches more than 700 Americans with institutional buyers every month. Each of these investors can deal directly with policy owners, bypassing brokerage and agent fees. These licensed life settlement providers have been vetted by state regulators. You can get instantly matched with buyers here. Over 700 Americans used Ovid’s service last month to get matched with buyers.
How is my offer calculated?
The way a life settlement works is that the policy owner receives an upfront cash payment in exchange for transferring ownership of the life insurance policy to a life settlement provider (a third party institutional buyer who specializes in purchasing life insurance). The buyer then continues to make the annual premium payments, and when the insured passes away, the buyer collects the policy’s death benefit.
All types of life insurance, Term, Whole and Universal, can be sold to buyers. In order to sell your policy, you generally must be at least 70 years old, but often at least 73 years old. The exception to this is if you have some sort of serious health condition – like late-stage cancer or something of equivalent seriousness. In addition to age, your life insurance policy must have a face value of at least $100,000. The older you are, the more valuable the policy. And the larger the policy, the more valuable the policy is. There are some exceptions to these qualifications, but they are handled on a case-by-case basis.
Your life insurance policy illustration is a document that shows how much it costs to keep your policy in force until maturity. Potential life insurance buyers analyze it to find out if your policy may be a good investment for them. They also carefully consider your health history, estimated lifespan, and the size of the policy. A combination of these factors helps determine whether you’ll get an offer to purchase your life insurance policy.
The offers vary greatly from person to person depending on the factors we mentioned above. However, selling your life insurance gets an average of 20% of your policy benefit value up front, in cash. That means if you have a $200,000 policy, you could receive $50,000 for your policy. Ovid has helped consumers get as high as 70% of the death benefit as a life settlement offer by matching them with the right buyers. Furthermore, after the sale, you are no longer responsible for paying the annual premiums. The buyer of the life insurance continues to pay the annual premiums instead.
For policy owners who can no longer afford or no longer need their policies, selling your policy can be a great option. In addition to a life settlement, there are some alternatives, the most common of which include withdrawing from your cash value or taking out a policy loan.
A broker has relationships with many companies that routinely purchase life insurance policies. They understand the preferences of various companies and it’s their job to get you the best possible offer for your life insurance policy.
Life settlement brokers handle the paperwork and communicate with life expectancy experts, your insurance company, and potential investors on your behalf. Their knowledge about which potential buyers may be most interested in your specific policy and situation allows them to create an environment where buyers bid against each other for your policy.
Before you decide to use a broker, make sure you trust them. Get information about all of their fees and commission amounts upfront. In most states, policy owners are protected by laws throughout the life settlement process. Even so, it’s important that you feel comfortable with your broker.
It’s possible to participate in a life settlement without the help of a broker. You should only attempt this if you have the stamina, knowledge, and patience to deal with a long process that involves a large and experienced investment firm. Handling your own life settlement will save you from paying broker’s fees. These savings can easily be offset if you accept an offer lower than you may have gotten through a broker, though.
The life settlement process can take months to complete. It’s crucial to deal with more than one buyer so you know you are getting a fair offer. The buyer knows more about life settlements than you, so proceed with caution.
Ovid is a life settlement exchange that instantly matches life insurance policyholders with institutional buyers who are interested in purchasing your policy. We use the information you provide about your policy, your policy profile, and your personal information. You can get an offer free of charge.
Answer a few questions and then instantly matches you with licensed life settlement buyers. These buyers are also highly regulated by the state, so you can feel secure about who you’re doing business with. To instantly get matched with buyers, just answer a few questions here.
Other than a life settlement, what are my options when I no longer want or need my life insurance policy?
Many people aren’t aware that their life insurance has value other than the eventual payout to their beneficiary or the small amount of cash value that may have accumulated over time. In fact, the number of life insurance policies that lapse due to non-payment of premiums each year is staggering.
While $900 billion in life insurance policies lapse every year, depriving beneficiaries of an eventual payout and rendering all of the premiums paid in the past useless, life insurance companies enjoy a great deal of pure profit because most policyholders don’t understand their options.
30 year term life insurance
1. Letting a life insurance lapse due to non-payment of premiums
The policy owner has the right to simply let the policy lapse by no longer paying the premiums. This relieves them of the ongoing financial burden and they can use that money for other things. The insurance company keeps all of the premiums paid in the past and they never have to pay a beneficiary.
2. Surrendering the policy to the insurance company in exchange for the cash value
Universal life insurance and whole life insurance have a cash value component that allows the policy owner to surrender the policy and receive some money. If you meet the criteria for a life settlement, it’s important to know that a life settlement amount typically exceeds the cash value of the policy.
3. Withdraw cash from the life insurance policy up to the allowable amount
More seniors rely on their life insurance policies as a source of cash now than ever. Depending on your policy type, you may be able to withdraw cash from the policy as an alternative to a life settlement. You will have to pay the annual premiums, even if you withdraw the allowable amount of cash from the policy. Your life insurance company will be able to tell you how much cash you have built up in your policy and the amount available for withdrawal.
4. Take a loan out against the life insurance policy
Temporary financial relief is possible by using a life insurance policy as collateral for a short-term loan. This option keeps the policy in force, but the amount of the loan must be repaid with interest. There is no qualification process for a life insurance policy loan. If the policy contract allows loans against the built-up cash value, it’s a viable option. To learn more about taking out a loan against your life insurance policy, contact your life insurance company.
Every year, 4.5% of life insurance policyholders stop paying their life insurance and lapse their policy. This means that out of the $20 trillion of in-force life insurance, roughly $900 Billion lapses annually. There is usually another option to lapsing their life insurance.
When you lapse your policy – it just becomes pure profit for the life insurance company because they get to keep your money and not pay out any additional money back to you. Investigate your alternative options to lapsing your life insurance. You never have any downside to investigating a life settlement because it’s free to get an offer for your policy.
People are increasingly turning to their life insurance policies for financial support. The three aforementioned options – selling the policy outright, taking a loan or withdrawing the cash – are all popular ways for people to get the money they need, particularly in retirement. So to answer the question “can I sell my life insurance policy for cash?”, yes – you should definitely explore this option if you have an unneeded or unaffordable policy and are in need of cash. Always explore a life settlement as an alternative to lapsing your life insurance policy.
Ovid is a life settlement exchange. We instantly match you with institutional buyers who are interested in your policy, based on you and your policy profile. Getting an offer for your policy from Ovid buyer partners is completely free. If you do want so sell your policy, Ovid has proven to help obtain average payouts above the industry average. We’re based in San Francisco and have been featured in Forbes, US News, Business Insider for the incredible work we do for consumers. You can learn more about Ovid here.