Q: I have a couple of paid life insurance policies that have a significant cash value. I was thinking about cashing the policy, but a friend suggested that I sell them. Is it possible to sell a life insurance policy?
A: There are a couple of ways to dispose of a life insurance policy. The most common is to surrender the policy to the company and receive the cash value.
Another option, which will grant you access to the cash value without disposing of the policy, is to take a loan from the policy. You can borrow the cash value or a portion of it and still retain the policy. The death benefit will be reduced and you may have to make payments on the policy, but the face value of the insurance proceeds should remain.
Under certain circumstances, life insurance policies can be sold. There are companies in the marketplace which can assist you with the sale.
Generally, the sale of a life insurance policy falls into one of two categories: life settlements and viatical settlements.
Life settlements involve the selling of a life insurance policy on the life of a healthy individual, usually over the age of 65. If you choose to investigate life settlements, don't be surprised if the cash offer is less than you might expect. The life expectancy of the insured will determine the policy's value. In other words, the longer you are expected to live, the less someone will likely be willing to pay you for the policy.
Viatical settlements are similar to life settlements, only they involve chronically or terminally ill individuals. Viatical comes from the Latin word "viatic," which means really creepy guy hoping you will die soon. Just kidding.
Viatical settlements usually result in a higher sales price, since your life expectancy is limited and the investor will recover his investment sooner.
Death is usually expected within two years. Viatical settlements were the big thing years ago as the AIDS epidemic ravaged society. However, with the invention of new treatments, investors soon found themselves owning life insurance policies on the lives of people who outlived expectations.
I suggest that if you are serious about cashing out of your life insurance, you contact your agent and discuss your options. You likely are going to get the hard sell and probably have to look at a bunch of graphs, but you are also going to get answers from someone in the business who really understands life insurance. Your agent might be able to get you some cash and leave in place a policy that will meet your needs.
If after talking to your life insurance agent you still want to pursue selling the policy, contact your attorney and accountant. Your decision to sell should not be taken lightly, and you should be fully informed before doing so.
Opinions expressed solely are those of the writer. Christopher W. Yugo is a member of the Indiana Bar and a vice president and senior trust Officer for First National Bank's Trust Department. Address questions to Yugo in care of The Times, 601 W. 45th Ave., Munster, IN, 46321. Yugo’s information is meant to be general in nature. Specific legal, tax, or insurance questions should be referred to your attorney, accountant or estate-planning specialist.
source:http://www.thetimesonline.com/articles/2008/02/03/business/business/doc612d46c98d0d0041862573e1006c8fff.txt
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