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Sep 28, 2009 -- Selling your life insurance policy for quick cash not smart
More and more people who are elderly or ill are selling their life insurance policies to death future contracts companies (aka life settlements) to score some quick cash.
Let's say you have a $100,000 policy. Someone may offer you $30,000 or $40,000 if you sign over your rights to a policy that would otherwise eventually pay out to your heirs.
Is this a good deal? Usually not. Think about it, you're taking pennies on the dollar for a policy you may have had for years. It will also likely create an additional tax burden for you.
The only time you should consider doing a life settlement is if you are out of all sources of income and have no survivors who need the money. But even then, you'll want to shop the market to make sure you're getting the best deal.
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What others are saying
Selling Life Insurance
If you have a level term policy that is in it's last year of it's term it is always a great option to sell the policy. Most term policies are convertible to universal life policies which settlement companies will buy!! So if you don't need the coverage for yourself why wouldn't you sell it?? Of course, this would only be an option for somebody 65 and up. Clark, I suggest you do a little bit more research before bashing an industry in which you don't have a good grasp on.
Selling Life Insurance
About two years ago, someone I know sold a $2 million term life policy to one of these settlement companies. The annual premium on the policy was $50,000 and it was getting difficult to make that payment. The policy was originally purchased to cover estate taxes. Since his estate had become smaller, he really didn't need this policy anymore. He actually got back almost every dime he had paid in premium over the years on the policy. So at that time, we feel he did very well selling the policy. He also consulted his attorney about this transaction along the way. Every situation is different!
sellinhg life insurance
My 80 year old father is trying, with some help of greedy people, to cash in his $50,000 paid up life insurance for $11,000. He doesn't need the money but these people he knows has talked him in to doing it, behind the families back, so they can share it with him. He doesn't need the money but these people have convinced him it's the right thing to do. We are trying to stop it. Are we wrong?
