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1) First you should determine your current and future cash needs and financial condition. It is recommended that you consult a financial advisor or lawyer.
*Tip: If you are considering letting a life policy lapse because of future premium payments, it is good idea to get a quote. You may be surprised at the hidden value of the policy.
2) Contact the insurance company or financial advisor who issued/sold your life policy to determine if you can cash out(surrender) or if the policy has a accelerated death benefit and what penalties(if any) are involved. Depending on the type of policy and contract, it may be possible to surrender the policy for a net cash surrender value or use the accelerated death benefit option directly with the insurance company. This option may give you more money than selling the policy.
If you would like to get competitive quotes before you surrender your policy, you should obtain all the contract details and confirm the life policy can be sold, assigned, transferred to a new buyer. You will need this information to give to the potential buyer.
*Tip: Check out the guide from the National Association of Insurance Commissioners (NAIC) entitled: Selling Your Life Insurance Policy
3) Search for a buyer of life insurance policies or life settlements. It is very important to feel comfortable with potential a buyer. Please see "Due Diligence" for tips on selecting a buyer.
There are a number of ways to find a potential buyer:
- talk to your financial advisor or lawyer,
- use this site to identify potential buyers,
- search the Internet,
- talk to friends, family, or acquaintances who have sold a life policy.
4) It is recommended that you have as much information collected before you begin this process. The potential buyer will request specific information about your life policy.
*Tip: Request to see the buyer's privacy policy.
Information requests can include:
- Life insurance policy/contract - from the insurance company or payment provider
- Insurance company contact information
- Your personal information including driver's license
- Your medical professional's contact information
- Your lawyer's information, if needed.
5) Get multiples quotes for your life policy. Potential buyers will generally give you a free analysis and no obligation quote for your life policy. They should explain all potential options and provide an amount that you will receive. While the highest quote may be attractive, you should consider all the factors together. These factors include: reputation, experience, your comfort level, etc.
*Tip: Ask the buyer up front about all costs and who is responsible for paying them.
*Tip: Beware of potential buyers who ask for a fee up front. There should be no fee for a quote or analysis.
6) Once you have selected a buyer, they will continue an underwriting process. This process usually lasts between 2 to 8 weeks, depending on the buyer, the insurance company and complexity of your situation and life policy. They will contact the insurance company to work through the details and ensure compliance with the new contract.
*Tip: Ask the buyer up front about the process and time to completion. Be cautious of very short process times.
7) When the underwriting is complete, you will have to sign a contract (purchase agreement) with the buyer. This contract should outline the terms and conditions of the life settlement payment.
*Tip: It is strongly advised that you have your lawyer review this contract before you sign it.
*Tip: You generally have a minimum of 10 days to rescind the contract after you receive payment, it varies by state. Check the contract.
8) Once all paperwork and contracts are review and completed, they will be sent to an escrow agent or independent third-party. When all the information and payment is verified by the escrow agent or independent third-party, you will receive your payment.
Congratulations! You sold your life insurance policy.
*Please note: these are general guidelines, all situations are unique and vary by state and company.
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