Selling American Family Life Insurance: What You Need To Know

Yes, you can sell your term life insurance policy. In fact, personal life insurance is considered property and can be sold, as per the U.S. Supreme Court ruling in 1911. There are two main ways to sell your life insurance policy: life settlements and viatical settlements. Life settlements are generally for healthy seniors, while viatical settlements are for those with a life-threatening illness or chronic health issues. When you sell your policy, you receive a lump-sum cash payment, and the buyer takes over responsibility for future premium payments and becomes the new beneficiary.

Pros and cons of selling a term life insurance policy

Selling a term life insurance policy is an option for many policyholders, but it is not suitable for everyone. Here are some pros and cons to help you decide if selling your term life insurance policy is the right choice for you:

Pros:

• Financial Gain: Selling your term life insurance policy can provide you with a lump sum of cash that can be used to boost your retirement savings, pay off debts, or cover immediate living or medical expenses.
• No Longer Needed: If your term life insurance policy is no longer needed, selling it can provide you with financial gain instead of simply letting the policy expire.
• Affordability: If you can no longer afford the premiums on your term life insurance policy, selling it can help you avoid the financial burden of continuing payments while still gaining some benefit from the policy.
• Terminal Illness: If you have been diagnosed with a terminal illness, selling your term life insurance policy can provide you with money to cover medical bills and long-term care costs. In this case, you may be able to sell your policy through a viatical settlement, which has no minimum age requirement.

Cons:

• Reduced Benefits for Beneficiaries: Selling your term life insurance policy means that your beneficiaries will no longer receive the death benefit. This could impact their financial security and ability to cover specific costs, such as mortgage payments or funeral expenses.
• Tax Implications: The proceeds from selling your term life insurance policy may be subject to income tax if they exceed the amount you have paid into the policy through premiums. It is important to consult a tax advisor to understand your specific situation.
• Fees and Commissions: There may be various fees and commissions associated with selling your term life insurance policy, such as administrative fees, transaction fees, medical underwriting costs, and broker commissions. These can reduce the overall financial gain from the sale.
• Alternatives Available: There are alternative options to selling your term life insurance policy that may be more suitable, such as accelerated death benefit riders, long-term care riders, policy loans, partial surrender, or converting to a paid-up policy. These options allow you to access funds without completely giving up your life insurance protection or impacting your beneficiaries.

Before making a decision, it is important to carefully consider your personal circumstances, financial situation, and the potential impact on your beneficiaries. It is also advisable to seek professional advice from a financial advisor or tax consultant to ensure you make an informed choice.

How to sell a term life insurance policy

A term life insurance policy is a type of life insurance that provides a death benefit to the policyowner if the insured passes away within a specified timeframe. This differs from a permanent life insurance policy, which remains in force until the insured's death or the policy's maturity date. Term life insurance is often referred to as "temporary insurance" because it meets a temporary need.

• Determine if your policy is convertible: When signing up for term life insurance, you may have been asked if you wanted to add a conversion rider, which allows you to convert a term life policy into a whole life policy. Typically, you must exercise your conversion privilege before the policy expires and before you turn a certain age (usually 65 or 70). If you have a conversion rider, carefully review the details of how and when you can convert from term to permanent insurance.
• Check your health and age: A variety of factors impact life settlement payouts, but your health and age are among the most significant. In general, younger and healthier people receive smaller payouts, if they qualify at all. Most people who qualify for a life settlement are at least 65 years old and have experienced a change in their health since initially taking out the policy.
• Check your eligibility: Before making any changes to your life insurance policy, check with a life settlement company to see if you would be able to qualify if you converted the policy. Seeing if you're eligible is usually a quick and free process.
• Explore additional options: Before finalizing the sale of your policy, understand all your options. If you are in good health and can afford the premiums, you may wish to hold on to the policy for the duration of the term or wait until you can receive a better life settlement payout.
• Have your policy appraised by a life settlement company: Reach out to a licensed life settlement company to receive an appraisal of your policy. Fast appraisals provided by a life settlement estimate calculator can give you a general idea of how much your policy may be worth. To get a full and accurate appraisal, additional eligibility questions will be asked, and policy and medical records will be collected and reviewed.
• Review the offer: If your policy qualifies, carefully review the offer provided by the life settlement company. Consider consulting a professional experienced in life settlements to guide you through the process and help you understand the offer.
• Accept the offer and finalize the sale: If you are comfortable with the offer, accept it and complete the necessary paperwork with the help of the life settlement company.
• Receive the funds: Once the sale is completed, you will receive the agreed-upon cash payout.

It is important to note that selling your term life insurance policy will result in the loss of the death benefit for your beneficiaries. Additionally, there may be tax implications, and the money from the sale could affect your eligibility for certain public assistance programs. Make sure to carefully consider these factors before deciding to sell your term life insurance policy.

What to do if you can't sell a term life insurance policy

If you can't sell your term life insurance policy, there are a few alternative options you can consider. Firstly, if your policy has built up a cash value, you can withdraw money or take out a loan against the policy. This option may, however, come with early surrender charges.

Secondly, if your policy has an accelerated death benefit rider, you can receive cash advances against the death benefit of your life insurance if you are diagnosed with a terminal illness. This is known as a viatical settlement and, unlike traditional life settlements, has no minimum age requirement.

Thirdly, if a doctor determines that you require long-term care, you can access a long-term care rider. This allows you to access some of the death benefits while you are still alive, and the money can be used to pay for the cost of care.

Finally, you can simply renew your term life insurance policy, convert it to a permanent life insurance policy, or let it terminate.

How to renew a term life insurance policy

Term life insurance provides a death benefit for a specified period, and once the term expires, the policyholder can either renew it for another term, convert it to permanent coverage, or allow the term life insurance policy to lapse.

Renewing a term life insurance policy is a straightforward process, and here are the steps to follow:

• Review your current policy: Before renewing, carefully review your existing term life insurance policy. Check the details of your coverage, including the term length, death benefit, and any additional riders or benefits included in your plan. Understanding your current coverage will help you make informed decisions about renewing.
• Assess your needs: Consider your current life stage and financial obligations. Evaluate if the coverage amount, beneficiaries, and other aspects of your policy still align with your needs. For example, you may have more savings now and require less insurance coverage, or you may have expanded your family and need additional protection.
• Contact your insurance provider: Reach out to your insurance company, agent, or broker to discuss your renewal options. They can guide you through the process and provide information about the specific steps required to renew your policy.
• Understand the renewal options: Term life insurance policies typically offer guaranteed renewability, allowing you to extend your coverage without undergoing a new underwriting process or medical exam. However, the insurance company will adjust your premium based on your current age and other factors.
• Compare alternative options: Besides renewing, you also have the option to convert your term policy into a permanent policy or purchase a different life insurance policy altogether. Weigh the pros and cons of each choice, considering factors such as cost, coverage amount, and the length of protection.
• Make any necessary adjustments: If you decide to renew your current term life insurance policy, work with your insurance provider to make any desired adjustments to your coverage, beneficiaries, or additional benefits.
• Finalize the renewal: Once you've confirmed the details of your renewed policy and made any necessary payments, your term life insurance policy will be extended for another term.

Additional Considerations:

• Renewal Cost: Be prepared for an increase in premiums when renewing your term life insurance policy. The insurance company will recalculate the premium based on your current age and other factors, which can result in higher costs.
• Timing: Initiate the renewal process well before your current policy term expires to ensure uninterrupted coverage. Contact your insurance provider to understand their specific requirements and deadlines for policy renewals.
• Alternative Options: If your circumstances have changed significantly, consider exploring alternative options, such as converting to a permanent policy or purchasing a different type of life insurance that better suits your current needs.

By following these steps and considerations, you can effectively renew your term life insurance policy, ensuring continued protection for your loved ones.

How to get a quote for a term life insurance policy

A term life insurance policy is a contract between you and an insurance company. In exchange for regular payments, known as premiums, the insurer pays out money to your chosen beneficiaries when you pass away. This type of insurance provides coverage for a specific period, such as 10, 15, 20, or 30 years, and is ideal for short-range goals like loan repayment or extra protection during child-raising years. Term life insurance is generally more affordable than permanent insurance, with lower premiums.

• Determine your needs: Consider your financial obligations, including long-term debts like mortgages or college fees, and future expenses. Calculate the coverage amount needed to meet these obligations. American Family Life Insurance Company offers a Life Insurance Calculator to help determine the right coverage amount and provide premium estimates.
• Choose the term: Select the duration of coverage that best suits your needs. Term life insurance policies typically offer coverage for 10, 15, 20, or 30 years.
• Compare insurers: Research different insurance companies and their term life insurance offerings. Compare their rates, customer reviews, and financial strength. NerdWallet, for example, provides reviews and ratings of various insurance companies.
• Provide personal information: When you're ready to get a quote, you'll need to provide personal information, including your age, health status, and smoking habits. This information will impact the quote you receive.
• Contact the insurer: Reach out to your chosen insurer to obtain a quote. Many insurers offer online tools or agents to help you get a quote. You can also work with an independent agent who can provide quotes from multiple companies.
• Compare quotes: Gather quotes from different insurers and compare them to find the best value for your needs. Ensure you are comparing the same type of policy, coverage amount, and personal details across insurers for an accurate comparison.
• Consider additional options: Depending on your circumstances, you may want to add benefit riders to your policy. These could include a Premium Waiver for Disability Benefit Rider or a Children's Insurance Benefit Rider.
• Lock in your rate: Once you've found the right quote and are satisfied with the coverage, lock in your rate by purchasing the policy.

By following these steps, you can obtain a quote for a term life insurance policy that meets your specific needs and provides financial protection for your loved ones.

Remember, the younger and healthier you are when you apply, the better your life insurance rate is likely to be. Don't delay, as your premium is based on your age and health status.

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