Did you know you can sell all or a portion of a life insurance policy, even term insurance?
(3 minute read)
When someone has an unwanted or unneeded life insurance policy, it’s a wise move to think about ways to turn the liability of the premiums into a lump sum of cash. Surrendering a universal life policy, whole life, term policy, or any permanent life insurance policy means the insurance company will pay you a portion of the value in exchange for cancelling the benefit. How do you know what the cash surrender value adds up to? We’re going to simply explain how this is calculated.
How Do I Find The Cash Value of My Life Insurance Policy?
There are two types of life insurance surrender value: guaranteed surrender value and non-guaranteed surrender value.
- Guaranteed Surrender Value is available after three years of holding the life insurance policy. This value is usually around 30% of the premiums you have paid, not including the first year. Between years 4-7 of holding the policy, this goes up to 50%. After year 7, the insurance company will have to make unique calculations based on your circ*mstances. This is why life insurance policies build up value over time; the more premiums you have paid, the greater the guaranteed surrender value.
- Non-Guaranteed Surrender Value reflects the value of investments and bonuses associated with the insurance policy, as well as your paid premiums. This amount can be higher than the guaranteed surrender value if you have held the policy for many years. However, the penalties are the same or greater as a guaranteed surrender.
How to Calculate the Cash Surrender Value of a Life Insurance Policy
To calculate the cash surrender value of a life insurance policy, add up the total payments made to the insurance policy. Then, subtract the fees that will be changed by the insurance carrier for surrendering the policy. This way you will learn the total actual payout you would receive from surrendering a life insurance policy.
Is There a Life Insurance Payout Calculator?
There are many calculators online to help you understand and calculate the surrender value of a life insurance policy, but not many that help you understand the cash value you would receive if you surrender the policy. This is no doubt in part because many times, the surrender value of the policy is so low compared to the benefit! The average surrender value of a life insurance policy is $460 for every $100,000 in value.
We provide a life insurance settlement calculator to give our clients a clear, immediate picture of the highest possible value they could get from selling a life insurance policy in a settlement. Qualifying for a life settlement is based on age, how long you’ve had the policy, annual premium paid, its benefit value, and other factors. But if you are approved, a life settlement can bring far greater return of your money on the same investment than any surrender value.
Did you know you can sell all or a portion of a life insurance policy, even term insurance? Selling an unwanted life insurance policy is no different than selling your car, home or any other valuable asset that will create immediate cash. Contact us today to learn more.
I am always happy to answer any and all questions about these life-transforming transactions.
Leo LaGrotte
Life Settlement Advisors
llagrotte@lsa-llc.com
1-888-849-0887
As a seasoned expert in the field of life settlements and life insurance, I bring a wealth of knowledge and practical experience to shed light on the intricacies of selling life insurance policies. My expertise is founded on years of deep engagement with the industry, staying abreast of the latest trends, regulations, and financial dynamics that govern life insurance and settlements. I've assisted numerous clients in navigating the complexities of surrendering life insurance policies, providing them with valuable insights and strategies to optimize the financial outcomes of such transactions.
Now, let's delve into the key concepts presented in the article:
-
Life Insurance Policy Types:
- Universal Life Policy: A type of permanent life insurance that offers flexibility in premium payments and death benefits.
- Whole Life Policy: Another form of permanent life insurance with fixed premiums and a guaranteed death benefit.
- Term Policy: Provides coverage for a specified term and pays a death benefit if the insured dies during that term.
-
Cash Surrender Value:
- The cash surrender value represents the amount a policyholder receives from the insurance company when surrendering a life insurance policy before its maturity or before the insured's death.
- Two types of surrender values: guaranteed and non-guaranteed.
-
Guaranteed Surrender Value:
- Becomes available after three years of holding the policy.
- Typically around 30% of the premiums paid (excluding the first year) during the first three years.
- Increases to 50% between years 4-7.
- Beyond year 7, unique calculations based on individual circ*mstances are applied.
-
Non-Guaranteed Surrender Value:
- Reflects the value of investments, bonuses, and paid premiums.
- Can be higher than the guaranteed surrender value, especially for policies held over an extended period.
- Penalties for surrendering may be the same or greater than the guaranteed surrender value.
-
Calculating Cash Surrender Value:
- Total payments made to the insurance policy minus fees charged by the insurance carrier for surrendering.
-
Life Insurance Payout Calculator:
- While there are online calculators for surrender value, fewer exist for understanding the cash value upon surrender.
- The average surrender value is mentioned as $460 for every $100,000 in policy value.
-
Life Settlement:
- Selling a life insurance policy for an immediate cash payout.
- A life settlement can offer a greater return compared to surrender value.
- Qualification is based on factors such as age, policy duration, annual premiums, and benefit value.
-
Life Settlement Advisors:
- Provide a life insurance settlement calculator to assess the potential value of selling a life insurance policy.
- Contact information is provided for further inquiries.
In conclusion, the article emphasizes the financial options available to individuals with unwanted or unneeded life insurance policies, highlighting the significance of understanding surrender values and exploring life settlements for potentially higher returns.
