Can life insurance be sold?

Found this question and answer form the Northwest Indiana News website..

Q: I have a life insurance policy that I am considering cashing in. However, a friend thought there might be a way to sell the policy instead. Can life insurance policies be sold?

A: The most common or traditional way to dispose of life insurance that you no longer wish to retain is to surrender the policy to the insurance company. You return the policy to the insurance company and they give you the cash surrender value.

For obvious reasons, the cash surrender value is less than the insurance benefit. Another option you might consider is to borrow the cash balance of the policy.

You can take a portion of the policy's cash value out by way of a loan. By borrowing the money, the policy stays in effect. The down side is you may need to make premium payments because the policy no longer has enough cash to be self-paying. If you don't make the premium payments, the policy may run out of money and the policy could lapse.

Another option is to actually sell the policy. The selling of a policy generally falls into two categories: life settlements and viatical settlements.

Life settlements involve buying life insurance policies from healthy individuals, generally over the age of 65. Essentially, there are companies that will buy your life insurance even if you are healthy. Remember, the longer your life expectancy, the less money the companies may be willing to pay. The company will treat the purchase as an investment and will calculate rates of return based upon your life expectancy.

Viatical settlements generally involve the selling of life insurance policies by people who are terminally or chronically ill.

Generally speaking, a person is terminally ill if they have a physical condition or illness, which is expected to result in death within two years. A person is chronically ill if they have been certified by a physician to be unable to perform at least two "activities of daily life" for a period of at least ninety days.

If you are either terminally ill or chronically ill, you may be able to viaticate your life insurance policy. The big attraction is that you will generally get more money by using a viatical or life settlement than by surrendering the policy to the company. Keep in mind that selling or surrendering a life insurance policy can be a taxable event. Uncle Sam will be looking for his taste.

Before surrendering or selling a life insurance policy, you should talk to your attorney, accountant and life insurance agent. Disposing of life insurance is complicated and it is best to discuss all of your options with a professional.

Complete article is here:
Life Insurance Settlement Article (Beware of pop ups)