Oftentimes, the original purpose of a life insurance policy no longer seems relevant. The purchase may have been to ensure your children can go to college even if you die. Alternatively, it may have been to replace your salary if you died early but now you are retired and no longer receive a salary. The policy could have even been purchased to provide funds to pay estate taxes; today, this strategy is considered archaic as a single person must have over $5,490,000 and a married couple over $10,980,000 before there would be any federal estate tax assessed (and these numbers are indexed to increase based on the inflation rate). It is now estimated that only 1/10th to 4/10ths of 1% are going to ever pay any estate taxes. Should you no longer need the insurance you have several choices:
- You can stop paying and do nothing. Every year, over 100 billion dollars of death benefit lapses for seniors over the age of 65.
- If there is cash value in your policy, you can turn it in to the insurance company and receive the cash surrender value (the amount the company will pay you for terminating your policy). However, the majority of life insurance policies are “term” policies, which have no cash surrender value.
- You can sell your policy in a legitimate “life settlement” market that almost always pay far more than the cash surrender policy of a policy. Even better, within this marketplace many insurance companies will pay you for your term policy even though it lacks a cash surrender value!
Unfortunately, this life settlement marketplace has a bad reputation because some unscrupulous people have entered into it. On the other hand, there are many ethical professionals in the market that are willing to help clients with, what seem like, purposeless life insurance. The difficulty is to tell them apart. The good news is I have investigated and I have relationships with a few excellent, ethical people in the marketplace who will shop your policies with bright investors to determine the interest in your policy and the best price that will be paid.
If you have any insurance policies that do not seem to have a current purpose, please contact me. Upon gathering a little information from you, we can usually determine if your policy is sellable and, if so, what the best price is. Then, you can decide if you want to sell it or not. Please do not throw away good money by letting a policy lapse or by accepting the cash surrender value when you can often receive much more!