Key Considerations for Retirees Seeking to Sell Their Life Insurance Policies

If you need more cash, look to the value of your life insurance policy. But you must determine if you're willing to forego the policy's death benefit for your beneficiaries and what amount of cash you can get for it. This article shows you some simple things to consider.

If you don't feel that you need to maintain your policy but would rather get cash for it, then begin the process by checking with your insurance agent. Have him determine how much you can get from it either as a policy loan or by surrendering it. Then you can compare these amounts to what you may get by selling your policy through a life settlement process.

Today, the best candidates for a life settlement are people in their 70s or older who have a life insurance policy valued at $500,000.

What seniors can receive for their policy depends on their age, gender and current health. Generally, the average payout is around 20 percent of the policy's death benefit. But that's still three or four times more than they would get for surrendering their policies to their insurance company.

But before you taking further steps to sell your policy make sure:

* your beneficiaries don't need any death benefit from your policy

* you need the money and have no other assets you can use

* you're OK with a payout that may be less than 20 percent of the death benefit, and

* your payout from selling is greater than your policy's cash surrender value

Understand and be cautious throughout the selling process

Be careful before signing away your life insurance policy. You may not get all you expect. Realize that life settlements (aka senior settlements) or viaticals (where the owner is terminally ill) occur when you sell your life insurance policy for some amount of cash. The new owner is an investor in your policy. He spends money by a cash payment to you and by continuing to pay the policy premiums in return for which he'll receive the policy death benefit when you (the insured) die. The cash you receive for signing may be more than you would receive from cashing in the policy with your insurance company but less than death benefit of policy.

If you will be selling your policy for a cash settlement, first review all of the financial options your policy offers you. Then, if you want to settle, make sure you understand the terms of the sale. Don't be pressured into selling. The law prohibits selling a policy in a viatical transaction within two years of the time it was issued unless you provide documentation that you have become terminally or chronically ill.

States regulate life settlement providers; and those arranging sales must be licensed. Be sure to contact your state's department of insurance to verify that you're dealing with a licensed producer or firm.

Her are a few tips to help protect you from fraud or misunderstanding:

* Don't give a salesperson any of your personally or financial information until you've determined that his solicitation is legitimate and you wish to engage in the transaction.

* Request documentation about every offer to purchase your policy and ask the salesperson to explain the commissions involved. Even though the salesperson is entitled to his commission, be sure you take the offer that's best for you - not him.

* Because the producer (agent) owes you a fiduciary duty, he's required by law to represent only you as the person selling your policy - not the other side too.

* Depending on your state, you may have a right to change your mind and void the contract within 30 calendar days from when the contract is signed by all parties, or 15 calendar days from when you receive the proceeds of the settlement - whichever date is earliest.

Using these considerations you're in a better position to achieve a satisfactory settlement.

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