Traditionally, purchasing a life insurance policy meant that if after a time your situation or circumstances changed and you found your life insurance policy was no longer needed or was too expensive, you could cancel the policy and receive a lump sum of cash for the surrender value at most. These days however, an increasing number of companies are recognizing the value in purchasing life insurance policies as an investment vehicle and are paying top dollar. In other words, for those who qualify, you can choose to sell your existing policy to a number of competitive bidders to cash in on this growing trend and the value of your life insurance in a Life Settlement transaction.
There are many benefits to be gained from selling your life insurance policy rather than letting the policy lapse or turning it in for the cash surrender value. For example; if you are unable to pay your premiums, your policy will lapse and no benefit is received. Thankfully, you can avoid this situation altogether by selling your policy to the highest bidder. Before you can make a sound decision regarding you financial matters, you have to understand the difference between the fair market value and the surrender value for your policy.
The difference between what a policy holder could receive for surrendering their policy versus the fair market value for their policy is astounding. For example, a study conducted in 2002 by the Wharton School at the University of Pennsylvania found that while the surrender value for average policy holders amounted to a total of 93.4 million dollars, the fair market value for policy holders amounted to 336.3 million dollars combined. This amounts to large difference between the cash value and market value of a policy.
If you find you can’t afford to pay your premiums anymore, you may want to consider selling your policy for cash as opposed to letting it lapse and receiving nothing. Many times the fair market value for a life insurance policy is oftentimes higher than the surrender value, this makes selling your policy a viable and economical choice. Since many people are unaware of the secondary market for their life insurance policy, they are under the mistaken impression that the surrender value offers greater benefit to them. Unfortunately, this is not always the case.
It used to be that policy owners only had one way to determine the value of their life insurance, which amounted to the surrender value of their policy carrier. The problem with this comes into play when you realize the amount doesn’t take into account the total amount of premiums paid into the policy or the value others could be willing to pay for your policy. Thus, the surrender value of the policy is often much lower than what you could sell your policy for in the Life Settlement market.
In short, for those who are no longer able to afford their current policy your best bet may be to sell your life insurance policy for the fair market value. This way, you won’t have to keep paying into a policy that you no longer need, or can’t afford and you’ll be sure to get your money’s worth from companies willing to pay for your life insurance policy.