Should Seniors Cash Out Their Life Insurance Policy?
It is reported that approximately 90% of life insurance policies go unused or are surrendered. In recent years, many consumers over 65 with a policy exceeding $100,000 in death benefits are turning to another option – cashing out their policies. Is this the right move for aging Americans?
In honor of Life Insurance Awareness Month, here’s a special segment from our archives about life settlements. Frank Darras appeared on KABC Eyewitness News to discuss what seniors need to know before selling their life insurance policies.
Selling your life insurance policy has become easier since this segment aired in 2008, and there are several reasons to consider a life settlement. However, many of the risks remain the same. Here are some factors to consider before selling your policy:
There can be tax consequences.
If you hold on to your life insurance policy, your beneficiaries get the death benefit tax-free. However, the money you make from selling your life insurance policy may be taxable, and it may affect your ability to qualify for public assistance like Medicaid.
There are privacy concerns.
Before you sell your policy, make sure you understand – and are comfortable with – how much of your personal health information is shared with the buyer.
You may not be able to get another life insurance policy.
Your life has a maximum amount for which it can be insured. If this amount is maxed out and you sell your life insurance policy, you may not be eligible to purchase another one. If you are eligible, you are likely to pay higher premiums because of your age and health status.
For more information
Learn more about eligibility from the Life Insurance Settlement Association