What to consider before selling your life insurance policy

Posted on January 31, 2009 under , ,

Selling your unwanted or unneeded life insurance for 20-30% of the face value or 5-10x the cash surrender value sounds great and simple enough, but what should be considered in determining if you actually need your life insurance?

Every situation is different, and selling your life insurance in a life settlement is not a small financial decision, so working with an advisor is recommended. There are, however, some common considerations:

Do you still need some sort of life insurance protection? In general, your are insurable up to your net worth. So if you have a $500k policy and a net worth of $1m, you are eligible for only another $500k in coverage.

Receiving a large cash settlement may interfere with public assistance benefits such as food stamps or Medicaid.

If you are comfortable with the above, selling your policy may be a financially sound move for you and your loved ones.

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