Settlement Options for a Life Insurance Policy

Most of us, at one point or another, will find it necessary to purchase life insurance. This is a wise decision, for many times, usually, we have people who depend on us financially, from elderly parents, children, and even our partners. So what happens when these needs change? Are you suppose to keep paying the expensive premiums for something that is not needed? Do you just let the policy lapse? In this article, we will discuss the multiple avenues you can travel when trying to figure out settlement options for a life insurance policy.

Your first option would be to just let the policy lapse. This means, just stop paying it, this will effectively cancel your insurance policy, and your insurance company will really enjoy this, as they have taken your premiums for years and years, and have paid you nothing in return. However, this is one option I would only use for a last resort, as the only benefit to you is you no longer have to pay the premiums.

Your second choice is to take the cash surrender value. That’s right, some policies accumulate cash, these are typically permanent policies and not term life policies. You may realize that the cash your life insurance carrier is willing to give you is far less than what you have actually paid. Obviously the insurance company needs to make money, but at the same time, you likely want a fair deal. A life settlement will yield you approximately four times the cash surrender value, which is your third option, when you think, “Should I sell my life insurance policy for cash?” Historically, selling your life insurance policy to a third party financial institution will yield the largest offers.

This last option is usually the most financially rewarding, if you meet the simple criteria, you must be over 72 years old, typically have $250,000 of insurance coverage, and that’s it! If you have a term insurance policy, it would have to be a convertible product, which any life settlement company would be able to find out. In this scenario, you will find offers from multiple financial institutions who are willing to pay you a rather large, lump sum for your life insurance policy.

With a few choices, try to find out which settlement option is ideal for your current situation. This will only ensure you are satisfied with your final decision. If you have any questions, speak to a licensed agent who is able to transact life settlements in your state.