insurance face value
Most people know they can not sell an insurance policy. Some companies pay more than the cash value. Even long-term insurance, which has no cash value, is a candidate for purchase.
This operation is called a life settlement. Life settlements have been around since 1995, are not new. While the purchase is facilitated by an insurance company, buyers tend to be pension and institutional funds that have policies in their investment portfolios.
Here are three reasons why a person could sell their insurance policy …
1. The policy has outlived its usefulness.
78% of all insurance is purchased for family protection. Families with children ensure breadwinner (s) until they have had time to accumulate assets or an appropriate 401 (k) plan to support the family, pay a mortgage and educate children. Most people have been there and done that.
However, later in the life of these needs may have disappeared. The house is paid, the kids have been to college and your 401 (k) plan has a balance ten times greater that the cost of coping with life.
Rather than continue paying the premiums, or surrender their cash value, you can sell for more than the cash value. Buy a boat take an extended vacation or go to the dealership and plunk down cash for the car you've always wanted.
2. The policy has a large loan.
There are three common ways a policy can acquire a large loan.
First, at some point he simply took a maximum loan of your policy. It might have been to meet an emergency, make an investment opportunity, any number of things. But the loan was never repaid.
Secondly, could have taken a modest loan years ago and never paid anything towards the principal. Each year, however, you received an invoice for the What is originally simple interest turns into compound interest.
Over time, the loan and unpaid interest may consume the entire value cash. That's when you get the letter from the insurance company tells you to keep the current policy is necessary to reach an astronomical amount of money.
But that's not the worst of it. When you call your agent to see what other options might be, he or she informs you that if failure of political will a gain (cash value less premiums paid) that the insurance company is obliged to inform the IRS. Even worse is the fact that there is no money in the policy insurance to pay the tax (remember that lapsed for nonpayment of premium and / or lack of other values). So we're going to have to come up with some tax elsewhere. I do not think you consider getting this information from their best days.
3. You own Universal Life and interest rates have decreased.
How this news is another bad day in the mailbox. This time the letter from the insurance company says that to maintain the current policy, have to come up with more than they could get for their firstborn.
How this occurs goes back to when you bought your policy. One of the main factors in determining the premium for a given nominal value of universal life is the assumption of interest rate stated in the original proposal. Remember that interest rates double digit? You could have bought your policy during this period of time. Most insurance agents are have suggested using a scenario of lower interest rates to be conservative. However, interest rates have dropped even below these play-IT-safe assumptions.
Selling your insurance policy prevents these three problems. In the first case, you have to pay any more premiums for coverage that is no longer necessary. In the second, the problem it has with the loan disappears and is replaced by cash. And third, the probable lapse of the policy by the fact that the premium to maintain coverage is off the charts is offset by money received through a sale.
About the Author:
Robert D. Cavanaugh, CLU is a 36-year financial and estate planning veteran and author of the free newsletter, “The Estate Preservation Advisor”. For cutting-edge, easy-to-understand financial planning resources and techniques to increase your income, reduce taxes and preserve your estate and to claim the free video, “How to Sell Your Life Insurance Policy for More than the Cash Value”, go to http://theestatepreservationadvisor.com/rd/subscribe.htm
Article Source: ArticlesBase.com – How to Sell your Life Insurance Policy for More Than the Cash Value
Get Cash with Your Life Insurance Policy – Life Settlements CALL 404-939-7551 WE BUY LIFE
