In recent years, it has been determined that roughly sixty percent of Americans don’t have life insurance (according to LIMRA’s 2018 Insurance Barometer Study). Despite that being over half of the U.S. population, twenty percent of those that have insurance, don’t consider it to be good enough. To take that to its logical conclusion, approximately forty percent of American’s don’t have the need of a financial backup plan, should they meet an untimely passing.
Of course, no one wants to really talk about life insurance policies. Simply put, the idea of planning for something that is only beneficial if you die, is hardly the most inspiring of financial endeavors. Add to that the growing efficiency of pension plans, lowering costs of medical care, the emergence of telehealth and the increase in pre-paid funerals, making plans for post-mortem use seems a little redundant. After all, where is the point in having a “death benefit” payout, if there are no beneficiaries after your death?
So, for that sixty percent of Americans, is the flip side (i.e. not having a life insurance policy in place) more beneficial than being insured? Should you, therefore, cancel your insurance?
Well, actually––no, not really. Even if you don’t want your life insurance policy anymore, and see little point in paying those monthly premiums going forward, then being a policyholder can still be a gainful experience. However, there is much more benefit to selling your life insurance instead of canceling it. For one, whilst canceling your life insurance policy may mean you get to stop paying those premiums, selling it will get you a whole lot more. Here are a couple of alternatives to canceling your life insurance policy that will gain you much more than you thought.
The first way for you to sell your life insurance policy and receive an immediate payout, is through a viatical settlement. With that being said, there are some pretty specific prerequisites that need to be the case before you rush to find a viatical settlement provider. Firstly, and there’s no easy way to be saying this, you need to be dying. Viatical settlements are only for people with a life expectancy of two years or less, so, unless you have a terminal or chronic illness that will render you completely, or mortally, incapacitated at the end, then you can’t pursue this option (though there will be alternatives discussed later).
The way that viatical settlements work is by a life insurance policyholder contacting a viatical broker (such as the highly recommended American Life Fund), and optioning a sale of the insurance to a third party “beneficiary.” In return, the seller (also known as the viator) receives a lump sum payout that is less than the policy’s death benefit, but more than the cash surrender value would have been, had the policy been canceled with the insurance company. From then, the original life insurance policyholder also relinquishes responsibility of the monthly costs, as the beneficiary takes over paying the premiums until the viator passes away, at which point they can claim the payout of the policy’s death benefit in full.
So, in short, a viatical settlement will return more money than canceling with the insurance company, but is only available to those with a terminal or chronic illness and a two-year life expectancy.
The alternative to a viatical settlement, that doesn’t require a shorter life expectancy, is in trading your life insurance policy for a life settlement. Life settlements closely follow the same points of a viatical settlement definition, but have one key difference. A viator does not have to have a chronic illness or be terminally ill in order to receive a payout. Basically, anyone can sell their life insurance policy at any time. The life settlement market is filled with potential buyers if you are looking for a larger sum of cash in a short time.
Benefits of a Sale
There are no terms to what you choose to do with the money you gain via a life or viatical settlement. Often, viatical settlements are used to cover end-of-life care and medical bills, but have been known to fund bucket list items and final vacations as well. Nevertheless, the spending of either a life or viatical settlement is entirely up to you. Regardless of whether you put your cash into fixing up your old house while moving into a new one, or putting all of your family on to a plane and traveling, no one is going to have any say in how you spend the extra money.