How to Cash in a Life Insurance Policy with a Life Settlement

Clock July 29, 2022


There are many ways to cash in a life insurance policy, but they may not all provide you with the windfall you want. This is why thousands of seniors have turned to life settlements as a fast, safe way to turn life insurance they no longer want or need into a large cash payment. If you want to know how to cash in a life insurance policy, we can help.

Consider Candace*. At age 79, she decided she didn’t need her life insurance anymore. She was divorced and her children had grown and become self-sufficient. She knew about life settlements but wasn’t sure if she would qualify. Why? Because she was in good health.

Still, she contacted us to learn more about cashing in a life insurance policy.

The appraisal process was quick and easy for Candace. She had a universal life insurance policy with a face value (also known as the death benefit) of $300,000. The policy used to have a cash surrender value, but she had used it to make several premium payments, and it had been reduced to $0.

After a short conversation with one of our life settlement experts that included questions about her medical history, currently lifestyle, and policy, we gave her the good news: Yes, she indeed qualified to cash in her insurance.

Within 1 week, we were able to present Candace with an offer to purchase her policy for $22,000, an amount that exceeded her expectations. In addition to the windfall of $22,000, selling the policy meant she no longer needed to make premium payments of nearly $1,000 per month. Combined, this provided Candace with much needed – and deserved – financial relief and freedom.


Four Steps to Cashing in a Life Insurance Policy

If you’re interested in cashing in your life insurance policy just like Candace, we can help. With Lighthouse Life, there are four main steps to life settlements.

Step One: See if you qualify and generate an estimate.

You can determine if you might qualify and even get a quick, no-obligation life settlement estimate by completing our simple online form. To do this, it is helpful to know the type of policy you have, as well as its face value. If you don’t know this information, you can contact your insurance company and request it.

Step Two: Complete a phone interview with our team.

During this call, we find out more about your policy as well as your health and lifestyle. After the call, we handle the rest, which includes contacting your insurance company and gathering the “in-force illustration” of your future premiums.

Step Three: Receive the policy appraisal and offer to buy.

If you qualify, it usually takes only a few days for us to make an offer to purchase your policy. We work hard to provide policyowners with fast offers that can give them financial peace of mind.  

Step Four: Receive your money

Finally, if you accept the offer, we will send you the forms required to complete your life settlement – and we’ll help walk you through the entire process! When we receive the final completed forms back from you, our payment to you goes into an escrow account managed by a national bank. When the insurance carrier changes the policy ownership and the transaction is complete, the payment is released from escrow and deposited into your account.

Different Ways to Cash in Your Life Insurance

If you’re still wondering how to cash in a life insurance policy, a life settlement is not the only way.

You may be able to take a loan, but you’ll have to pay it back, and there could be tax implications.

You may be able to withdraw money if your policy has accumulated cash value, but it might increase your premium payments and/or reduce the death benefit amount, in addition to potential tax liability.

You could surrender the policy altogether, but the money that you receive depends on the policy’s cash value. Since the average life settlement pays 4 or more times the amount of a policy’s cash value, there’s a chance you could leave a significant amount of money on the table in the process.

Lastly, you could just stop paying the premiums and let the policy lapse, leaving you with nothing at all. Since a life settlement of any amount is better than lapsing a policy for no value in return, it makes financial sense to consider one before lapsing a policy.

Contact Lighthouse Life 

While there are several ways to cash in a life insurance plan, life settlements are often the best financial option for policyowners like you. On average, qualified policyowners who opt to sell their life insurance policy through a life settlement receive a payout of between 5% and 25% of the policy’s face value.

With Lighthouse Life, the first step is fast and easy. Generate a fast, free estimate with no commitment. One of our experts can provide you with more information specific to your policy, as well as walk you through the next steps. Don’t hesitate to reach out with any questions you may have.

*The name of the case study has been changed to protect private information.


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