Life insurance is an essential part of many family’s retirement and financial plans. If you have a life insurance policy, you are not alone – 60% of Americans carry some form of life insurance coverage. If you have children or are married, you probably already have a life insurance policy or two – perhaps through your employer, bank, or credit union.
Buying a life insurance policy is a smart investment, and you may be wondering what your investment is worth. The answer depends on many factors, like what type of policy you own and how long you have owned it. Even if you are not considering selling your life insurance policy, you may still need to know its value for estate planning and tax purposes.
Read on to learn more about how much your life insurance policy may be worth and how to find out its value. Then reach out to the experts at Uplife Finanace to learn more.
Why Should you Determine Your Life Insurance Policy Worth?
There are several good reasons you may want to determine your life insurance policy’s present value. The most obvious reason would be if you planned to sell this asset – any buyer would require a sound valuation of your life insurance policy to know if it is a smart investment for them. Having valued your policy, you will also know if the price you are offered is sufficient for your policy’s value.
But even if you are not interested in selling your life insurance policy right now, you may still want to know its worth. This helps estate planning and tax planning purposes and may carry investment portfolio implications depending on your tax classification. And if you decide to sell in the future, you will already have an idea of its worth.
Because determining the value can be a complicated process, you may wish to engage the help of your financial advisor or other experts.
Determining the Value of a Life Insurance Policy
Many different valuation factors are essential when determining the value of a life insurance policy.
Determining the Value to Sell Your Life Insurance Policy
Selling your life insurance policy often happens through a process called a life settlement. Life settlements are the sale of your life insurance policy in exchange for an immediate lump sum payment. The payment amount you receive will be less than your policy’s face value, but more than the surrender value.
Life settlements can be a good solution for insureds who want to sell their life insurance policy. Policyholders may qualify for life settlements if they are aged 65 or older and their life insurance policy has a face value of $100,000 or greater.
A special type of life settlement is known as a viatical settlement – this type of settlement requires the insured person to be terminally or chronically ill to qualify. There is no age requirement with a viatical settlement.
Advantages and Disadvantages to Selling your Life Insurance Policy
Suppose you are interested in determining the value of your life insurance policy so you may sell it. In that case, there are some advantages and disadvantages of the sale you should consider first.
You may decide that selling your life insurance policy is not the right decision for you. But you may still need an immediate influx of cash to help your current situation. Your life insurance policy may still be able to help you out.
Taking a Cash Value Withdrawal – You may be able to take a cash-value withdrawal from your life insurance policy by simply calling your insurance company to ask. They may have different terms and conditions that apply. Be aware that taking a cash withdrawal may increase your monthly premiums or decrease the policy’s future benefit amount, or both. You should consider if cash withdrawals are the right option for you. Cash withdrawals may be subject to taxes.
Taking a Loan From Your Policy With Cash Value as Collateral – If your policy has accrued cash value, you may be able to take a loan from the cash value. You will need to pay the interest on it, but you do not need to repay the loan – the loan amount simply reduces the amount of cash value available on your life insurance policy. The interest may cause your monthly payments to increase more than you are comfortable with; however, the interest will reduce the death benefit if not paid off.
Surrendering Your Policy – You can always elect to surrender your life insurance policy – you can do this by notifying your insurance company that you would like to cancel your policy. They will pay you for any accumulated cash value the policy has at the time it is closed. Be cautious, though, because you may be charged a high penalty through a surrender charge fee if you have not owned your policy for long. Surrendering your policy means terminating it, so your beneficiary would lose the policy benefit when you pass away, and you would lose any additional policy benefits it pays during the policy period, such as dividend payments.
How to Sell Your Life Insurance Policy
If you have determined the value of your life insurance policy and have decided the right choice for you is to sell it, you may be wondering how to do that. The process is straightforward once you have made your decision. Transactions may take several months, however, from application to approval.
Your first step is to contact a life settlement provider and complete an application and medical release. Information is collected and reviewed for underwriting; then, a detailed offer is made. You may decide to accept or decline the offer – it is up to you. If you accept the offer, you will be scheduled for closing and issued payment via check or direct deposit once the insurance company processes the change of ownership and beneficiary.
There are many sound financial reasons you may need to know how much your life insurance policy is worth. Whether you are looking to sell a policy you no longer need or are interested in determining the value of your policies for tax and estate planning reasons, valuing your life insurance policy can be an essential part of your financial and retirement planning process.
While it can be complex, understanding a few key things about your policy will help. Knowing what type of policy you own, its face value and its accrued cash value, and how much you have paid in premiums throughout the policy are all helpful figures to have when determining your life insurance policy’s worth.
Researching your policy and working with experts to help you find its value is an important financial move.
How do I Learn More?
To learn more about how much your life insurance policy is worth, contact the experts today at Uplife Finance. Our licensed professionals will be happy to answer any questions you have.
Knowing the value of your life insurance policy is essential: