Policy Owners
Can You Sell a Term Life Insurance Policy?
If you’re wondering, can you sell a term life insurance policy, the answer is sometimes. Unlike permanent life insurance, most term life insurance policies do not qualify for a life settlement.
If you’re wondering, can you sell a term life insurance policy, the answer is sometimes. Unlike permanent life insurance, most term life insurance policies do not qualify for a life settlement. However, certain term policies may be eligible if they are convertible or the insured has been diagnosed with a terminal illness and the policy qualifies for a viatical settlement. Understanding the type of coverage you have is the first step in determining whether your policy may have value in the life settlement market.
Can You Sell a Term Life Insurance Policy?
Yes, it is possible, but only under certain circumstances.
Most term life insurance policies expire after a specific number of years and become annual renewable term policies. The premiums on these policies typically rise exponentially each year. Because of this, many term policies are not eligible for a life settlement.
However, a term policy may qualify if:
- It includes a conversion privilege that has not expired.
- It can be converted to a permanent life insurance policy before the transaction is completed.
- The insured has been diagnosed with a terminal illness and the policy qualifies for a viatical settlement.
If you’re unsure whether your policy is convertible, Settlement Group can review your policy and explain whether it may qualify.
Does Term Life Insurance Have Any Cash Value?
Traditional term life insurance provides a death benefit for a specified period of time, but does not accumulate cash value like whole life or universal life insurance.
That means surrendering a term policy generally does not result in a payment from the insurance company.
Although term policies typically have no cash value, certain convertible policies may still have value in the life settlement market if they meet the necessary eligibility requirements.
What Type of Term Policy Qualifies for a Life Settlement?
The term policies most commonly considered for a life settlement are convertible term policies.
A convertible term policy allows coverage to be converted to a qualifying permanent life insurance policy without providing new evidence of insurability, provided the conversion period has not expired.
In addition, some term policies may qualify for a viatical settlement if the insured has been diagnosed with a terminal illness, even if the policy is not convertible.
Eligibility depends on the specific policy provisions, the insured’s age and health, and other underwriting factors.
Is a Convertible Term Policy Worth More Than a Non-Convertible Policy?
In general, yes. A convertible term policy may have greater value because the conversion feature allows a purchaser to convert the coverage to a permanent policy before the conversion deadline expires, providing predictable premiums for the life of the policy.
A non-convertible term policy generally has little or no value in the life settlement market unless it qualifies for a viatical settlement.
Every policy is evaluated individually, and the value of a convertible term policy depends on factors such as:
- The remaining conversion period
- The insured’s age and health
- The death benefit
- Premium costs after conversion
- The terms of the policy
How Is a Term Policy Valued Differently Than Whole Life or Universal Life?
Whole life and Universal life insurance already provides permanent coverage, so buyers evaluate the policy based on factors such as the insured’s life expectancy, premium obligations, death benefit, and policy features.
A term policy requires an additional consideration: whether it can be converted to permanent coverage before the conversion period expires.
If a term policy cannot be converted, it is generally not eligible for a traditional life settlement unless it qualifies for a viatical settlement. Because of this, the conversion privilege is often one of the most important factors when evaluating a term life insurance policy.
Can Seniors Sell a Term Life Insurance Policy?
Some seniors may qualify for a life settlement for seniors if they own a convertible term life insurance policy that remains within its conversion period.
As people age, life insurance needs often change. If you no longer need your coverage, can no longer afford the premiums, or purchased the policy to protect children who are now financially independent, selling a qualifying policy may provide access to cash that can be used for retirement, healthcare expenses, long-term care, or any other financial need.
Not every senior with term life insurance will qualify, but it is often worthwhile to have a convertible policy reviewed before allowing it to lapse.
How Can I Find Out Whether My Term Policy Qualifies?
The easiest way to determine whether your policy may qualify is to have it reviewed by a licensed life settlement company.
Settlement Group can review your policy to determine:
- Whether it is convertible
- Whether the conversion period is still active
- Whether it may qualify for a life settlement or viatical settlement
- Whether there may be value before you allow the policy to lapse
Many policy owners are surprised to learn that a qualifying convertible term policy may have value, even though it has no cash surrender value.
Learn Whether Your Term Policy May Qualify
If you own a term life insurance policy and are considering your options, Settlement Group can review your policy and explain whether it may qualify for a life settlement or viatical settlement.
Give us a call today for a no-obligation policy review. 912-882-0840