Selling Your Life Insurance Policy is Like Selling Your House

For many Americans, life insurance and real estate are cornerstones of their financial planning.  Ironically, these two assets are very similar, fulfilling the same long-term roles and often liquidated at the same period of time later in life.

Life insurance provides peace of mind, ensuring your loved ones will be taken care of in the event of a sudden passing.  But what if circumstances change in retirement? Kids become self-sufficient adults and financially secure with their own families; the umbrella of protection necessary for decades might not be required anymore and paying the premiums and rising cost of insurance is burdensome.

A parallel narrative occurs for many people with their home.  After purchasing a multi-bedroom house to accommodate multiple children, kids eventually leave to start their own lives independently.  The “empty nest” home may begin to feel like too much space and paying the carrying costs (remaining mortgage, if any; utilities; insurance, repairs, etc.) is unjustified. 

You Can Sell Your Life Insurance Too

Everyone is familiar with selling a home, but selling an existing life insurance policy? The answer is a resounding “Yes!”

If you no longer need or can afford a life insurance policy during your retirement years — or perhaps you could use a cash infusion to offset unexpected medical bills or the costs of a dream vacation with your grandchildren — then you might consider selling your life insurance policy in a financial transaction called a life settlement.

A life settlement enables qualified policy owners to receive cash for selling their policy to a state-licensed financial institution called a life settlement provider.  The buyer assumes the premium payments – eliminating that line item of expenses from your budget - and collects the death benefit when the insured passes away.  The payout is higher than the cash surrender value offered by the insurance company, if there is any money left in the policy to access.  In addition, a life settlement is an outstanding alternative to lapsing a life insurance policy (for $0) when there are no funds remaining at all in the policy. 

To illustrate the value and consumer-friendly nature of life settlements, the recently published Life Insurance Settlement Association (LISA) Annual Market Data Collection Report found that policy owners received $842 million from the sale of their unwanted life insurance policies last year, more than six times the cash surrender value of those same policies. 

Life Insurance and the House-Selling Mindset

Seniors who decide to explore the sale of a life insurance policy should incorporate the same mindset that they naturally embrace when selling a home.

For starters, just like selling your house, approaching a life settlement should not be a quick decision.  It requires careful planning, due diligence and the correct strategy to unlock the maximum amount from your life insurance policy.

If you decide to move forward with a sale of either asset, then you have the same objectives: find the right buyer, maximize the price and ensure a smooth transaction. Here are four ways to embrace the house-selling mindset when selling your life insurance policy:

1.      Find a Good Agent

When selling a house, a real estate agent with experience and a network of buyers is more likely to attract the best offer and oversee a smooth closing.  Life settlement brokers act in the same manner for the sale of a life insurance policy.  It is imperative to identify and work with a reputable, licensed life settlement broker who specializes in these types of transactions, negotiates tirelessly on your behalf and has finalized sales with multiple funding sources.

2.      Know The Market

In the housing market, you need to know the sales price of comparable properties in your area to determine market value.  With a life settlement, a life settlement broker, like Welcome Funds, provides a free, no-obligation valuation of your policy based on multiple factors including age, health and the life insurance policy’s death benefit.

3.      Curb Appeal

For a house sale, you might undergo minor repairs and stage the interior to increase the home’s marketability. With a life settlement, led by the efforts of a highly organized, relationship-driven life settlement broker, you can create a comprehensive sales file of the necessary documentation to increase the willingness and speed of prospective buyers to extend a meaningful offer.

4.      Be Patient

Selling a house quickly to the first potential buyer, even if the offer is close to your bottom-line acceptance price, might mean leaving money on the table.  Exercise patience and allow the market to establish itself.  The same recommendation applies to selling a life insurance policy.  Do not feel pressured to sell your policy quickly and for the first offer or even multiple offers from one buyer — take your time, enlist the assistance of a life settlement broker and test the market.

Auction Your Life Insurance Policy

A prospective buyer of a life insurance policy has no incentive to offer its highest price when a senior applicant contacts it directly.  Rather, the buyer’s objective is to bid as low as it can to secure a sale and accomplish its goal of securing the best return, or ROI, for its investors.

Life settlement brokers, on the other hand, are incentivized to drive the sales price of a policy as much as possible.  Their commission is tied to as much money as they can secure for your policy.  Life settlement brokers are obligated by state regulations to represent the best interests of the policy owner during the life settlement process.  By taking a policy to the open market of licensed life settlement providers through an auction platform, and allowing the competitive marketplace to tell you what your life insurance policy is worth, the offers, often from five or ten plus buyers, can steadily and systematically increase from the first initial bid to the final accepted bid.  The power of a life insurance policy auction is the separating mechanism that savvy life settlement brokers implement to the great financial benefit of the policy owners they represent. 

Conclusion

There is nothing necessarily complicated in theory about maximizing the sale price of a house or a life insurance policy.  An experienced and licensed agent or life settlement broker prepares it to sell and then takes the asset to the open market, allowing competitive offers to determine the selling price.  The complications occur, however, within the multiple phases and subtle nuances of the process itself as they both are document-intensive transactions.  It is in your best interest to have an experienced professional advocating and negotiating on your behalf with as many buyers as possible and fulfilling the various requests to finalize the ultimate sale.

For more information on life settlements or to obtain a free appraisal of your life insurance policy, please call (877) 227.4484 or go to www.welcomefunds.com.