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The Little-Known Option of Selling Your Life Insurance Policy

October 31, 2019
David Parker, Esq.
When shopping for funeral services, be wary.
David Parker, White Plains and New City NY Estate Planning Attorney
David Parker, Esq.
David Parker is an attorney who specializes in Estate Planning and Elder Law and has been practicing law for 30 years. Be it Wills, Trusts, Powers of Attorney, Health Care Proxies, or Medicaid Planning, David provides comprehensive and caring counsel for seniors and their families. A large portion of David’s practice is asset protection strategies so that families do not lose their hard earned savings to nursing home care costs. He also handles probate administration for the settlement of estates.
The bottom line is, not everyone wants to continue paying premiums for a policy that will only benefit someone else.

You might not know that you can sell your life insurance property to get cash now. If this idea appeals to you, make sure you do your research before you exercise the little-known option of selling your life insurance.

Why People Sell Their Life Insurance

The reasons someone might want to part with a life insurance policy, can range from highly practical to downright inadvisable. The bottom line is, not everyone wants to continue paying premiums for a policy that will only benefit someone else. Here are some of the common reasons people give for exchanging their life insurance for cash:

  • The reason you bought the policy no longer exists. Let’s say the judge in your divorce ordered you to maintain a term life insurance policy to guarantee child support, but your children are grown up and long past the age for child support. As long as you have enough in savings or you have paid off the mortgage and other significant debt, the ever-increasing premiums might not make financial sense.
  • The premiums for life insurance often increase as you get older. That policy that only cost you $40 a month when you were in your twenties or thirties, can run you $150 or $200 a month a few decades later. It might be a better use of that money to put it into your 401(K). If you have already retired, the funds you are spending on a life insurance policy could cause you financial stress. You should not do without your medication, for example, so you can pay a life insurance premium.
  • It would be a shame to pay all of those premiums for use and then lose the coverage because you can no longer afford to continue paying. Instead of letting your insurance lapse for nonpayment, explore the possibility of getting some much-needed cash for the policy. You can put that cash into your retirement savings, pay down your mortgage or other debts, or cover large expenses, like medical bills.

How to Sell Your Life Insurance Policy

If you and your financial advisor decide that selling your policy is the right decision, you will need to compare the companies that buy life insurance policies. Here is how the process works. The “life settlement company” will pay you around 20 percent of the benefit value of the policy. The company pays the premiums for the rest of your life and then collects the full amount. The person you designated as the beneficiary will no longer get any proceeds from your policy.

Make sure you deal with a reputable company. Check with the insurance commissioner, consumer protection agency, and Attorney General’s Office to see if the company has a history of complaints or lawsuits. Some of these life settlement companies are reputable firms, but con artists try to defraud people every day through a variety of schemes, including posing as life settlement companies. Because of the high potential for consumer fraud, the federal government regulates this industry carefully.

You might want to talk to an elder law attorney near you about how the regulations of your state differ from the general law of this article.


HuffPost. “3 Not-So-Crazy Reasons To Sell Your Life Insurance.” (accessed October 9, 2019)


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