Can I Sell My Term Life Insurance Policy?
Term life insurance is the most common form of life insurance as it provides the most amount of coverage for the least amount of money. With that said, most term policies do not pay out a death benefit because about 95% of the time the insured outlives the term. So a common question I get as a life settlement broker is how can I sell my term life insurance policy? The process starts with gathering some information about your contract and learning more about how to sell life insurance policy.
How Can I Sell My Term Life Insurance Policy for Cash?
What most people don't realize is that their term policy is convertible to a permanent policy such as a universal life policy anytime during the "conversion period". With exception to terminal cases, for an investor to want to buy a policy, it needs to be a permanent form of life insurance so that it pays out no matter how long the insured lives. If your policy is still convertible, then we can proceed with gathering information. You can find out if it's still convertible either by reviewing your original contract and searching for language about a "conversion deadline" or "conversion period", etc. If you don't have your contract handy you can simply call your insurance carrier and ask if your policy is still convertible, and be sure to ask when the deadline is to convert it.
If you recall when you applied for your term life insurance, the underwriter gave you a specific health rating which determined the premium rate at which you would be approved. Someone who is really healthy when they applied might get "Preferred Best" and pay only $100 a month for coverage, while someone of the same age but average health might receive the "Standard" health rating, and pay more like $220 a month for the same amount of insurance. When you convert your term policy into a permanent policy the carrier will automatically issue you a new contract at the same health rating you received before regardless of whether or not your health has declined since you first applied. In other words you could be really sick and unhealthy and still have a permanent life insurance policy issued to you guaranteed as long as your conversion deadline has not passed.
Depending on your carrier, they will offer either a whole life option or universal life option, and some may offer multiple options. If you're considering a life settlement, it's important that you do not convert your policy yourself, and work with a life settlement broker to gather your conversion options and present those to buyers as certain plans will be more appealing to a buyer than others. The buyer will convert the policy during the settlement, and that first premium may be shockingly large for any individual anyway, so typically the buyer will make that first premium, or will reimburse the seller at the close of escrow.
For many term policy owners, when they're nearing the end of their term they start to look into whether or not they can sell the policy as they're just going to let the policy lapse at the end of the term anyway. Even if your term is not over yet you'll want to review your contract to find out when the "conversion deadline" is so you don't miss it when it comes up. Sometimes the deadline is simply at the end of the term, but other times it's by a certain age. And you probably don't want to wait until the last second as doing a life settlement can often take 3 months to complete. If you are days away from the conversion deadline, it is possible to make it work, but we have to get working on it ASAP. In fact, call us right now at 213.784.1481 so we don't lose any time.
Whether you can’t afford the premiums any more or a prior need for the insurance is gone, one solution might be to sell it via a life settlement. (1)
Can I sell my term life insurance policy?
Lastly it's important to have the right expectations when selling a term policy conversion. The conversion deadline is often right around the age cusp of consideration for life settlements. Folks who are 65 and have some health problems may get offers, but other times folks of this age are simply too young and healthy to be considered. Investors don't want a policy where the insured is likely to live another 30+ years. That is simply too long to wait for a return on investment.
We do get offers for 15 or even 20 year life expectancies if the premiums are relatively low, and sometimes we might only get $5k or $10k for a policy, and that's still worth it to most folks who were just going to let their policy lapse anyway. Depending on your case we may get significantly more, even in the six figure range if your case justifies it. Underwriting will be determined solely on medical records so there is no medical exam or interview. If you are in perfect healthy we may have a hard time, but if you have documented health concerns, the more the merrier as is pertains to getting a larger settlement. There's no cost to apply or test the market.
How can I sell my term life insurance policy? Give us a call and we'll tell you exactly what we need to do to order a conversion illustration as well as your medical records so we can bring your case to market. If we find multiple groups who want it, we'll seek out the highest bidder and you can decide whether or not you want to accept the offer.
Can I sell my term life insurance policy for cash? Yes, it is possible to get a cash offer. Once an offer has been accepted, we'll either transfer ownership of the term policy to the investor and they will convert it later, or they'll convert it during the settlement. In either case, as soon as the ownership and beneficiary has changed, the settlement funds are released to you either by live check or wired to your bank account.
I always recommend trying the market, and I can help clients determine if their policy has any value pretty quickly. There is little work that has to be done by the seller as the broker will take on the heavy lifting in the marketplace.
To get started, fill out the free appraisal request on this page and we'll get back with an estimate quickly. Learn more about how to sell life insurance policy.
What Does a Good Term Policy Settlement Look Like?
Once we've determined your policy is convertible, the next thing we'll want to do is order a conversion illustration. Depending on which carrier you have, they may have multiple universal and whole life products available for conversion, or you may only have one option. There are over 800 life insurance companies, and unfortunately they are not all created equal.
What I mean by that is sometimes we run the conversion illustration and find out the premiums cost $50k a year for a $500k policy, which is ridiculously expensive for a 70 old in decent health. You could likely start a new policy with another carrier and pay a lot less as long as you're healthy enough to be approved. Let's hope your conversion costs are reasonable and interesting to an investor.
Conversion products vary, and if we have a choice between universal life and whole life, universal life is generally considered cheaper as with whole life you're paying more for certain guarantees. Within universal life there are also a variety of options, and if you're on the phone with an in-house agent they're probably going to push you towards the variable universal life product because the carriers usually charge the highest fees for those products and in turn pay higher in commission. Investors don't want high fee products and they're also not looking to accumulate cash value. In fact, they're simply looking for the lowest cost product and want to pay the minimum level premium to age 100 with a level death benefit.
What a lot of policy owners don't realize is that there are a number of charges on your policy each year that make up your minimum premium payment. Your biggest charge is going to be your cost of insurance, while there are also ongoing administrative fees and policy charges as well. With exception to Guaranteed Universal Life products, most universal life products have an increasing cost of insurance. When you get into your 70s, 80s, and 90s, this number can become incredibly high. If you don't level out the premiums, your premium could be $10k one year, and a few years later it's $30k, or $100k+ depending on your policy and age. When people who already own a universal life policy and get to this stage they face either losing the entire policy, or if they're aware of life settlements they may be able to recoup some of their investment. If their health is in decline, they may actually get more than they put into it, again it just depends on the case. At the end of the day it can be a huge financial relief to be freed from these premiums.
Term Life Insurance: A life insurance policy whereby the insured purchases coverage lasting for a specific period of time. (2)
When you call your carrier to order the illustration you want to ask for the lowest cost universal life product, which is usually just a basic universal life product with a fixed interest rate, and have it run as minimum level premium to age 100 with level death benefit. If you don't feel comfortable requesting this information, I'm always happy to do the call with you as I will need your authorization for the carrier to run it.
As I mentioned earlier, it's important to mention that you should not convert your policy yourself before doing the settlement. For one, we don't know for sure yet if you will get any offers. Another reason is that you might be leaving money on the table if you convert it yourself as the carrier often pays a commission to convert a policy and this money can add more money to the pot when considering a settlement.
While we're ordering the conversion illustration you should also be calling your primary care physician and any specialists and ordering the last 5 years of your medical records as this will be needed for underwriting. There will not be a medical exam or interview, so the more medical records the better. We want to make sure your ailments are well documented by a medical doctor as that will make a difference as to how much you're likely to get in a settlement.
When you call your carrier to order the illustration you want to ask for the lowest cost universal life product, which is usually just a basic universal life product with a fixed interest rate, and have it run as minimum level premium to age 100 with level death benefit. If you don't feel comfortable requesting this information, I'm always happy to do the call with you as I will need your authorization for the carrier to run it.
As I mentioned earlier, it's important to mention that you should not convert your policy yourself before doing the settlement. For one, we don't know for sure yet if you will get any offers. Another reason is that you might be leaving money on the table if you convert it yourself as the carrier often pays a commission to convert a policy and this money can add more money to the pot when considering a settlement.
While we're ordering the conversion illustration you should also be calling your primary care physician and any specialists and ordering the last 5 years of your medical records as this will be needed for underwriting. There will not be a medical exam or interview, so the more medical records the better. We want to make sure your ailments are well documented by a medical doctor as that will make a difference as to how much you're likely to get in a settlement.
If your conversion premiums are reasonable and based on the number of years and months the underwriter believes you are likely to live, if there's enough room to eventually make a profit then we should expect to see some offers. These might range from a $5k - $10k offer, or significantly more even in the six figure range so long as the numbers work for the investor.
If the underwriter believes you have 10 years to live, your premiums are $50k a year, and you have a $1MM death benefit, then it's likely we will see some decent offers, but if the death benefit is $500k we already know the deal doesn't make sense as the investor will have to pay $500k in future premiums plus the settlement upfront to get $500k back, and that's not a good investment.
As you can tell, the underwriting is an important factor into determining how much an investor is willing to offer. While it seems odd to determine how long someone is likely to live, it's important to understand that these are just numbers and nothing in-fact. When investors purchase policies they know that some will pay earlier than expected making them more profitable, and some will pay later costing more than expected and may even come at a loss. Institutional investors build large portfolios of policies to balance the pros and cons of these investment risks.
When you apply for a life settlement there's always good news and bad news. If you're considered healthy, the good news is you have your health, but may not get any offers. And if you're considered unhealthy, while that's not ideal for you, most of us will be unhealthy at some point, and this means you will likely receive more in a life settlement, and that's the good news today.
For the majority of term policy owners, when they reach the end of the term they usually just let the coverage go. Why not try to get some money back, even if it's just $10k? Most term policies can be continued after the term, but your fixed premium is over and your premiums will go up significantly in a very short amount of time. As an example, if you were paying $100k a month on your term policy, after the term has ended that premium can turn into $500 a month the first, year, $1500 a month the second, $4000 a month the 3rd year, etc. It becomes astronomically expensive to keep in-force, which is why most of the time an investor won't buy a term if it's not convertible.
At this point you should be a well informed consumer, and it's time to talk to a life settlement broker who can bring your case around to a wide variety of investors in search of the highest offer. Fill out the free appraisal form or give us a call at 213.784.1481
Zack Taylor
4 years in life settlements