Depending on the type of coverage you have purchased, it may be possible for you to sell your insurance policy to a third party or investor. An action of this kind is usually taken by terminally ill individuals with limited life expectancies, particularly if they have no dependents or cannot name a beneficiary. By selling their policy, individuals in this position can use the money they receive to pay for medical care or to enjoy the remainder of their life. The sale of a life insurance policy is often referred to as a viatical settlement. So, what kind of policies qualify for this option and how does it work?
How Does the Process Work?
In a viatical settlement, a buyer or investor will purchase the policy in question at a price that is less than its expected payout. The amount is usually made immediately accessible to the original policyholder (or viator) in cash, so that they can make use of it right away. The buyer then becomes the beneficiary and receives the eventual payout upon the viator’s death.
There are also life insurance acquisition charities that will buy policies from individuals who have been diagnosed with a terminal illness and require swift financial assistance. Settlements of this kind are often managed by specialist brokers who will oversee the entire process on behalf of the parties involved, often for a commission. They negotiate with the buyers on behalf of the viator in order to find the best possible price for their client.
Policies That Can Be Sold
Generally, the only types of coverage that can be sold to a third party are policies of the whole life variety. However, if you wish to sell your term policy, first check whether it can be converted to whole life. If it can, you should be able to convert it, then sell your new whole life policy via a viatical settlement. Take a look at the terms and conditions of your coverage and discuss the matter with your insurer if it isn’t clear whether you will be able to sell your insurance coverage in this way. Depending on where you are based, different rules may be applicable.
For example, in the US, a policy can only be sold if its face value exceeds $100,000. If you are considering purchasing new life insurance coverage, it may be worth checking whether or not the product you are considering has the potential to be sold as part of a viatical settlement. If it is a term policy, be sure to ask whether it is convertible to whole life. A contract that can be sold to provide financial support for care or other expenses in the event that you are diagnosed with a terminal illness may provide a little extra comfort or a sense of security for the years ahead.
If you are considering a viatical settlement, discuss your options with the provider of your coverage today to learn more about the process. You can also check out articles online to get a better idea of the right questions to ask during your meeting.