When Should You Sell a Life Insurance Policy?

As you build your career and your family, you’ll have a lot of decisions to make. Among the most important of those will be the decision to pay into a life insurance policy.

A life insurance policy or Roth 401(k) vs Roth IRA is a powerful way to protect your loved ones. It allows you to provide for the people you care about even after you’re gone, and it is a great safeguard that will give you peace of mind. If you’re the main breadwinner in your family (or the only one), then life insurance policies are particularly important: Your loved ones will lose their main source of income if you die unexpectedly while still in your working years, and a life insurance payout can help ensure that your family does not face financial hardships. Life insurance payouts can also help with funeral costs and other end-of-life expenses, which can really add up.

But as you grow older, you may find that a life insurance payout feels less and less necessary. Perhaps you’ve saved money for retirement, and perhaps your children are off on their own now, earning money themselves. Perhaps you’ve prepaid for funeral expenses. Whatever the case, your life insurance payout may feel more like a luxury than a necessity. And, meanwhile, other costs can be mounting.

Treacherous costs late in life

Dying may be expensive, but it’s nothing compared to staying alive. As we grow older, we need more and more help to stay healthy, active, and happy. And if we fall seriously ill, the costs only get higher. Treating deadly diseases like cancer is as expensive as it is difficult, and the costs can build upon each other as you fight your disease. It’s important to get the most out of this life, but it’s also important to leave your family in a financially secure position. So what can you do?

At times like this, you can take advantage of another way in which life insurance can be financially beneficial: You can sell your life insurance payout.

As the experts at Sell My Life Insurance Policy explain, the idea is pretty simple: Unless you’ve found the secret to immortality, your life insurance policy is going to pay out at some point. If you’re elderly or very ill, it may not be long. That payout is, of course, worth a fair bit; enough, in fact, that others are willing to buy it. Swapping cash for your life insurance payout is more or less like a loan: You get money now, and you pay the folks you sold your policy to after you’re gone, with the payout your policy generates.

And this can make a lot of sense financially. A dollar now is worth more than a dollar tomorrow (really — it’s called the time value of money), and that’s especially true when you have debts to pay.

Should you sell your life insurance policy?

If you’re in great shape financially, you may not need to sell your life insurance policy. If you’re happily paying your bills and living exactly the life that you want, you don’t need to take out any loan or use any loan-like mechanism to generate cash; you might as well enjoy your money and keep the eventual life insurance payout.

But if you’re facing serious bills and mounting debt, choosing the cash now can be a much, better financial decision for you and your loved ones. After all, debt generates interest. Your loved ones may stand to lose a whole lot more to debt interest on toxic debts such as credit card debts and short-term loans than they would gain by not selling your life insurance policy.
For a comparatively trivial cost, you could generate cash now and get rid of those toxic debt sources. By paying off your medical bills, credit card debt, and other forms of debt — especially those which cannot be discharged in bankruptcy — you’ll leave your loved ones in a much better long-term financial position. That, of course, was the point of getting life insurance in the first place. So if the situation merits it, don’t waste time and money: Sell your life insurance policy to protect your family’s long-term future.