For those who need them, life insurance policies can provide much-needed funds for loved ones if the primary breadwinner passes away unexpectedly. There are instances, however, when a life insurance policy is no longer needed. In some cases, an emergency may require that a policy be liquidated so that the insured can use the money for other purposes, such as paying off medical bills or large debts, like mortgages or car loans. In the past, it was more difficult to settle or cash out a life insurance policy. This has changed over the past few years, and more settlement options are available.
The following are a few common myths related to life insurance policies and the truth behind them.
1. Only the Elderly or Ill Can Sell Their Policies
The fact is, anyone can sell their life insurance policy. The difference in terms of how much is offered as a settlement will depend on the individuals’ circumstances. This can include their age, overall health, and many other factors that make their situation unique. Not everyone will be ill or elderly, and not everyone will need to pay off their debts. In many cases, an elderly or ill person will cash in a policy to get the type of healthcare they need to be most comfortable.
2. You Have to Sell Your Entire Policy If You Want to Settle
Many people mistakenly believe that they have to sell their entire policy to receive a settlement offer. That isn’t true. If a person no longer needs their entire policy, they now have the option to sell all or part of it. A man with a $2 million life insurance policy may only need $500,000 to provide for his spouse or pay off his debts. He can sell the other $1.5 million and have enough money to live comfortably after he retires. The key is knowing how much death benefit you want to keep and then finding the right settlement offer that works for you.
3. I Have to Keep My Policy Even If I Don’t Need It
There may come a time when you no longer need your policy. Paying off your mortgage, car loans, and other types of debt means you no longer require a life insurance policy to pay them off if you pass away. If you are close to retirement age and have a nice pension to fall back on, you may choose to sell your life insurance policy once you have paid your debts. You can then put the money you would spend on premiums into an immediately accessible savings account.
4. Term Policies Can’t Be Sold
You can sell both term and whole life insurance policies. In the past, it was large, whole life policies that were often settled for cash. Now individuals can settle almost any type of policy of any size. Individuals with term policies may be able to take care of situations for which they purchased the term policy. Once they have paid off old debts or made sure their children are financially secure, the need for a term life policy no longer exists. Selling the policy once it has reached its full term gives them access to the funds to use it for other purposes.
When you are ready to find out more about how you can settle your life insurance policies, call and schedule an appointment with one of our agents. At Jack Stone Insurance Agency, we have been helping our clients find answers for almost 50 years. Visit or call our office and let us help you find the solutions to all of your insurance needs.