A term policy is a kind of policy where you hold it for a specific period of time, and on reaching the maturity period, you can either renew it for another term or convert it to permanent coverage, or you can allow the policy to get terminated automatically. There are different types of term life insurance; level term life insurance, convertible term life insurance, family income benefit insurance, and the increasing term life insurance. If you’re holding any of the above-mentioned policies and are wondering about selling your term life insurance, then our article will guide on understanding the various aspects of selling and this will help you decide accordingly.
TYPES OF SETTLEMENT:
Usually, there are two types of settlement; the life settlement and the viatical settlement. The former can be done when you have a high life expectancy, and you’re in need of immediate cash in hand. On the other side of the coin, the latter is the type of settlement where you need to be diagnosed with a terminal illness, have a low life expectancy, or in the age group of senior citizens.
To avail life settlement in the term life insurance, you will have to follow the steps:
- Make sure that your term life insurance is of convertible nature.
- Approach your insurance provider and announce that you need to convert the same into universal life insurance; submit the required documents on demand.
- After a fixed period of time, if your application qualifies, your policy will be successfully converted and you can go ahead for the life settlement process.
It’s important to note that there may be fee or charge levied for the process; make sure to ask the same to your provider to know more in detail.
THE WORKING OF LIFE SETTLEMENT
When you’re selling your term life insurance policy and opting for a life settlement, for a successful conversion, you will be required to go through the following steps:
You need to find a potential broker or agent company: You can find potential dealers in the LISA association. This association is dedicated to choosing the best professionals in the field to assist consumers like you with respect to dealing with the process of selling or buying process. It’s important to check your agent’s past or existing crime records too; this will help you understand the existing environment with respect to their service. Also, make sure to check their ratings online, their website, views of consumers through reviews to know the detailed experience and the possible risks. Alternatively, you can ask for a recommendation through word of mouth to know more in detail.
Settlement of deal: On finding a potential buyer, you can either speak directly or through your agent to know their expectations as well as what they would offer. On dealing through your agent, the dealing will be comparatively hassle-free, and you will have to pay a certain percentage of the deal for the same. It’s important to note that you may usually get 20% of the overall face value; however, such tends to vary between 10% to 50% on account of various factors like your age, your past records consisting of frequent selling of policies, your illness, and the proof that the possible cure cannot increase your life expectancy (this can increase the overall rating on the policy as the buyer can receive the benefit as soon as possible), the face value and the cash value; it’s important to note that many buyers prefer less cash value as the rating on the policy increases as the cash value decreases. This is because of the logic that buyers may not be interested in “buying” the cash as the cash will not be available for immediate use too.
THE PROS AND CONS OF TERM LIFE SETTLEMENT:
PROS:
- You will be able to get cash immediately for your use.
- You will become eligible to invest in other insurance policies.
- CONS:
- Your beneficiaries will not receive benefits on account of your death.
- The benefit you receive in hand can be taxed.
- You may be required to share a percentile of your benefit if an agent is involved.
- You may become ineligible for Medicaids.
- Frequent selling of your policy may not be able to get you a prospective buyer; this arises due to the psychological factors of the buyers.
CONCLUSION:
Term life insurances are policies for a short period of time, and you can sell only on account of it being convertible; this means that you can convert the convertible life insurances only and obtain the benefit through the converted form. It’s important to note that, to have a higher rating on policy, you will be required to have a low life expectancy, low cash value, and high face value. Depending on your requirement for the amount of cash and emergency level, you can trade accordingly. Though it’s advisable to have an agent to have a hassle-free selling experience, you can opt for direct dealing too, given that you understand the working and risk existing in the secondary market.
