October 12, 2019
Term life insurance is by far the most common form of life insurance in the United States, and many term policy holders wonder if a term policy could be eligible for a life settlement. In fact, many people assume that because there is no cash value in a term policy that it automatically would be disqualified for a life settlement consideration. Term policies actually are eligible for a life settlement, and in fact can be better than a permanent form of life insurance!
According to the American Council of Life Insurers Fact Book, in 2016, 40% of the life insurance policies issued were term policies which accounted for 69% of the face amount of policies issued that year. By design term policies are set to expire after a certain amount of time, but the life insurance industry group, Limra, found that one out of every 14 term life policy holders lapse their policy every year. Some of those lapsed policies could have been let go after the policy had served its purpose, but many of those policy holders may never have known that they could have considered a life settlement as an alternative- their insurance company certainly would not have informed them!
Consider Your Options Before Letting Your Policy Lapse
A life settlement is the sale of a life insurance policy to a third party, for more than the case value of the policy but less than the death benefit. Too many people assume that since there is no cash value in a term policy that it would not have value in a life settlement, but many term policies still work for a life settlement. This is because the value in a life settlement offer is not based on account value, the offer takes into account many variables including age, health, life insurance premiums, and any riders on the policy. It can help if there is still a conversion option on the term policy, but even when it has expired the policy may still provide value through a life settlement evaluation.
If you have a term life insurance policy that is no longer needed, wanted, or is nearing the conversion date, it may be a good idea to contact a life settlement provider or broker, licensed in your state, to evaluate your policy before you make a decision to let the policy lapse.