Why would someone sell their life insurance policy?
There are many reasons why someone would sell a life insurance policy, however the most common reasons relate to changing needs such as:
- Medical or long term care is required
- Premiums have become unaffordable
- Financial hardships are present
- New estate planning or investment objectives
- Death or divorce of a spouse
Is it legal to sell a life insurance policy?
Yes. The Supreme Court made this possible back in 1911, ruling that life insurance is an asset like a house that may accumulate in value and be bought or sold.
Who is eligible to sell a life insurance policy?
Our broad purchasing requirements generally cover seniors age 65 or older who have experienced a recent change in health, a life expectancy greater than two years, and who own a qualified life insurance policy.
What types of life insurance policies can be sold?
Generally all types of life insurance policies can be sold, including Term, as long as it is convertible to Universal Life.
How much money will sellers get for their policy?
There are many factors that determine a policy’s market value such as age, medical condition, life expectancy, and policy type. Typically a seller can expect to receive amounts equal to 15% of a life insurance policy’s face amount. Offers always exceed the cash surrender amount available from the life insurance company.
What happens after a life insurance policy is sold?
After a policy is sold, all rights and obligations of the life insurance policy are transferred to the new owner. Sellers are no longer responsible for paying premiums and are free to use the proceeds however they wish.
Are the proceeds from selling a life insurance policy taxable?
Proceeds from selling a life insurance policy may be subject to taxes. Though there are no Internal Revenue Code amendments pertaining to life settlements, there are some general guidelines to consider:
- First, the insured’s cost basis, or the amount that equals the policy owner’s total premium payments, will come back to the policy owner income tax free.
- Second, the difference between the policy surrender value and the cost basis will be taxable as ordinary income to the policy owner. This also works exactly the same as if the policy were surrendered to the insurance company for its cash surrender value.
- Third, the amount received in excess of the cash surrender value most likely will be taxed as a capital gain—presumably a long-term capital gain since the contract will be owned for more than a year. The maximum capital gains tax rate is currently 20%.
Are there any application costs or medical exams?
No. There are no application costs or medical exams required for sellers.
How long does it take to sell a life insurance policy?
The process typically takes 8-10 weeks.
E-mail: info@lifeequitysolutions.com
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