What can I do with my life insurance policy if I no longer need the protection?

In some families the purchase of life insurance is primarily to cover a period of time when the need is greatest. When the family moves on to a new phase in life where they don’t necessarily need as much or maybe any life insurance they may have to make a decision on what to do with their current policy. The answer varies based on what kind of insurance is in place now as well as how healthy the insured is at that time.

There are two basic kinds of life insurance temporary or permanent. If you only have a temporary policy you likely have no cash value and the premiums blossom past the initial term making these policies unattractive to a policy buyer.  Of course if you are near death and the term is many years down the road you may be able to sell the policy but there is no guarantee. Of course you can always just cancel the policy with no penalty, saving ongoing premium expense.

If you have a permanent policy however, you should have a cash value that can be cashed in should you decide to cancel the policy. You can also sell the policy to one of the companies that purchase such policies. In this transaction you typically will get more than the case value of the policy. You are no longer the owner of the policy and can’t reclaim ownership either. The beneficiary will be changed to become the company that bought the policy. They will pay ongoing premiums and benefit from the payment of the death benefit at such time it occurs.

There are some who disagree with this market where policies are bought by investors. I present it as something out there you can do with your policy. You will have to choose for yourself if the benefit of the extra cash from getting rid of the policy is worth it, knowing someone else has an economic gain from your death.  There are a number of companies that purchase policies and I don’t intend to endorse any one over another. You should always review offers from more than one purchaser before making a decision on which one to use though.

Some factors that are considered when a price is set to purchase your policy include your age, cash value of the policy, ongoing premium, and your health, or another way to think of it how much longer you expect to be alive, based on actuarial tables.  The buyer expects to make a reasonable return on their investment to they have to calculate how much money will go into the purchase and ongoing maintenance costs of the policy, subtract that from the death benefit and then calculate a return and make sure it matches their expectations.  Thus, the folks who tend to make the most off a policy sale are those who are terminally ill and not expected to live very long.  Those who are in prime health usually get less for the same policy due to a longer life expectancy.

Before you cancel, cash-in, or sell your policy you need to ask yourself, is there any chance I will need a policy again?  If you answer yes, then examine the cost of a new policy and see, will getting a new policy be cost prohibitive, and if so, seriously consider keeping the current one. Also, consider is your health worse now than when you get the prior policy. If you say yes, then you need to really consider if you would even be able to get a new policy if needed. If you are in a position where you can’t get a new life insurance policy again carefully consider is getting rid of my current policy a good idea of not.

There are many considerations you should make before pulling the trigger and making a change. For help with life insurance in Houston be sure to give us a call. We are here to help with new policies or even help you replace coverage or sell your policy to a buyer. We can also help you with Long Term Care Insurance, Health Insurance, and Disability Insurance.