How To Sell a Term Life Insurance Policy

Rebecca Parson
Rebecca Parson

Rebecca Parson

Author

Rebecca Parson is a financial and tech writer with 10 years of experience writing about topics such as life insurance, commodities investing, and the SaaS industry. She has a master’s degree from Johns Hopkins University and a bachelor’s degree from the University of Mary Washington. Her writing has appeared at money.com, sacbee.com, cart.com, herodevs.com, blanchardgold.com, and more.

Brian OConnel
Brian OConnel

Brian O'Connel

Contributor

Brian O’Connell has been a contributing writer for U.S News & World Report since 2016. A former Wall Street bond trader and the author of two best-selling books; “The 401k Millionaire” and “CNBC’s Creating Wealth”, he has 20 years experience covering business news and trends, particularly in the business and financial sectors. He believes education is the best gift a financial consumer can receive – and brings that philosophy to every story he writes. His byline has appeared in dozens of top-tier national business publications, including CBS News, Bloomberg, Time, MSN Money, The Wall Street Journal, CNBC, TheStreet.com, Yahoo Finance, CBS Marketwatch, and many more.

By Rebecca Parson, Brian O'Connel
Author, Contributor, Life Insurance

If you have a term life insurance policy and your health or financial circumstances have changed since buying coverage, it may be possible to sell your policy.

Doing so can relieve you of the expenses of maintaining a policy and help you generate cash to pay for ongoing medical care or other living expenses.

In this guide, we’ll show you how to sell a term life insurance policy and when it’s possible. 

Can I Sell My Term Life Insurance Policy?

Yes, you can. If you have a term life policy with a face value of $100,00 or more and you are 68 years old or if your health has changed since you bought the policy, you may be eligible to sell your term life policy for cash.

Most term life policies have no value and can’t be sold. These policies don’t build cash value and, unless your health circumstances have changed considerably since buying the policy, there’s no value to the policy.

You will need to speak with a life settlement expert to have a better evaluation of whether or not your policy is eligible to be sold for cash.

What Is a Term Life Insurance Policy?

A term life insurance policy is a type of life insurance that provides a set amount of coverage for a specific period — typically five to 30 years. If the policyholder passes away during this term, the life insurance company pays out a death benefit to the designated beneficiaries. Otherwise, the policy expires (or enters a post-premium period that can be prohibitively expensive).

How To Sell a Term Life Insurance Policy

If you have a term life insurance policy and want to sell it, start by confirming you are 68 years or older (or younger, in some cases) and have a policy with a face value of $100,000 or more. Also confirm that your policy is convertible. Next, have your policy appraised by life settlement companies, compare offers, accept an offer, and sign over your policy for cash.

Here’s how to sell a term life insurance policy, step-by-step:

Step 1. Consider Your Age and Health

The first thing to do when considering selling a term life insurance policy is to evaluate your age and overall health. These two factors are crucial in determining whether you can sell your policy and how much it may be worth. 

Term life insurance policies are designed to provide coverage for a specific period, so the value of your policy largely depends on your life expectancy and the terms of your policy. 

If you are in good health and have no significant underlying health issues, it may be difficult to find a company willing to buy your policy. However, if you have a health condition that arose after the policy was taken out, you may be able to sell your term life insurance policy to pay for medical bills or other living expenses.

If you’re unsure whether your policy is saleable due to your age and health, our experts are happy to help. We’ll review your policy at no charge and let you know whether you might be able to sell your policy for cash. Click here to book a call with one of our in-house experts.

Step 2. Carefully Review Your Conversion Rider

Next, you will need to carefully review your conversion rider.

What is a conversion rider?

A conversion rider allows the term life policyholder to convert their term policy into a permanent policy, typically a universal life policy, without undergoing another health exam. This makes your policy much easier to sell and much more valuable to would-be buyers.

One significant advantage of a conversion rider is that it allows a policyholder to obtain permanent coverage that would otherwise require going through an entirely new underwriting process. However, it’s also important to note that there are typically certain constraints to this conversion. For instance, these riders may specify conversion windows, limiting the time frame within which you can convert a term policy.

If you aren’t sure if your policy is convertible or how your policy’s conversion language may impact its value, we’re happy to review your policy to see if it’s convertible and under what circumstances.

Step 3. Confirm You Qualify for a Life Insurance Settlement

The last thing to do before fielding offers for your policy is to confirm with a buyer that you actually qualify for a life settlement. In most cases, your life insurance policy must be at least two years old to qualify. The policy should also have a face value of at least $100,000. 

To confirm your eligibility for a life settlement, contact a life settlement company like Beca Life. An expert can review your specifics and confirm whether or not you are eligible to sell your policy. There’s no cost for a consultation and no impact on your credit.

Step 4. Get Your Policy Appraised by a Life Settlement Company

Once you select a life settlement company, provide them with your policy information to get an appraisal. This information typically includes your policy type, face value and the current premiums you are paying. The company will also request medical records to get an accurate picture of your current health status.

After reviewing your policy information, the life settlement company will then be able to provide you with a rough appraisal value for your policy. This value can vary based on several factors, including your age, health, policy type, and premiums, and is a rough estimate of the amount of money you can expect to receive for your policy in a life settlement transaction.

Additionally, different buyers may be interested in different types of policies. Working with a life settlement company with a wide network of buyers is essential to ensure you receive the most competitive offer for your policy.

Step 5. Review the Offer(s)

Once you have your policy appraised, you will receive a potential offer(s) for your policy. It is now time to review the offer(s).

The amount offered for your policy will depend on various factors, including your age, health, the face value of your policy, and the current interest rates. Selling your life insurance policy can have significant financial consequences (including tax implications), so carefully consider the implications of selling. 

If you receive multiple offers, review each one. Look at how much each company offers you for your policy and fees associated with the transaction.

Step 6. Accept the Offer and Close

Once you receive an acceptable offer from a broker or funder, review it to ensure the terms are acceptable. If you decide to move forward, you’ll need to sign a contract agreeing to the terms of the sale. After you sign the contract, the funder will put the full sale price into an escrow account, which will be held until the transaction is final. 

At this point, you’ll need to sign additional documents, such as change forms and ancillary agreements. These may include giving the funder the right to receive future medical updates, which will be necessary for the sale to close. As part of the process, the funder will also conduct due diligence to ensure the policy is valid and in good standing. 

Step 7. Await Funds Disbursement

After you have accepted an offer, your insurance company will transfer ownership and beneficiary rights to the buyer. This transfer typically takes a few weeks to complete. During this time, the buyer will track the policy to ensure it remains in good standing and that they can assume ownership without any issues.

Once the transfer is complete, you will receive the full amount of the offer, less any fees. In some states, you may have a set period, typically 15 to 30 days, to rescind the transaction and decide whether you want to cancel the contract and return the funds.

Alternatives to Selling Your Term Life Insurance Policy

Selling a life insurance policy can be an involved process. However, in many cases, it’s the only way to alleviate yourself of the obligation to continue paying premiums and to recoup premiums you’ve already paid to date (and often more than what you’ve paid). If you have ongoing medical expenses or other cash needs, selling a life insurance policy can be the best way to improve your finances. However, if you’re unable to sell your policy or want to consider other options, here are a few alternatives:

  • Let policy lapse: This is the most common alternative that policyholders face when they have trouble paying ongoing premiums. If you no longer need the coverage or can no longer afford to pay premiums, allowing your policy to lapse is the default option. However, there may be better choices than letting your policy lapse.
  • Accelerated death benefit: Some life insurance policies come with an accelerated death benefit rider that allows the policyholder to receive a portion of their death benefit early if they become terminally ill. This option can provide financial relief without having to sell the policy.
  • Transfer your policy to a relative: If you have a family member who can pay your ongoing premiums, you can transfer ownership of your policy to them. This can be a beneficial option for both parties, as it allows the new owner to receive the death benefit (which can be tax-free in some cases).

Each of these options has benefits and drawbacks. To learn what options are available to you, submit your policy today. Fill out our short contact form, and one of our life settlement experts will review your information and reach out to you within 24 hours.

Sell your life insurance policy for cash.

See if you qualify now.

We’re here to help. Speak with a Policy Specialist today at +1 848-456-8333