Who Can I Sell My Term Life Insurance To?

You have probably never considered selling a Term Life Insurance, but it is that time when so many do. Life circumstances change, and so do financial priorities. You might have a policy that you no longer need or can afford. But the question remains: who can you sell your Term Life Insurance to in Canada? At Canadian LIC, we often hear the tales of clients puzzled about the options of selling or transferring their Term Life Insurance Policies.

In this blog, we delve into who you can sell your Term Life Insurance to, how it is done, and what factors you should consider. Whether you bought your policy through Term Life Insurance Brokers or chose Term Life Insurance online, this is for you.

What Does Selling Term Life Insurance Mean?

The sale of a Term Life Insurance policy is often called a life settlement. When you sell your policy to a third party, it provides a cash payout. The buyer continues to pay the premiums and receives the death benefit when you die. This is sometimes used by those who no longer need the coverage or who may need to liquidate immediately for other purposes.

Reasons People Consider Selling Their Term Life Insurance Policies

• Policy No Longer Needed: Some individuals no longer need coverage since their financial obligations, such as mortgage or dependents' needs, are fully covered.
• Premiums Are Too High: Renewing or continuing a policy can become expensive, especially as you age. Selling the policy provides a way to avoid high premiums.
• Financial Emergencies: Unexpected expenses may make selling your policy a practical solution for immediate cash.
• Converting to Term Policy Failed: If the window for converting the term policy into a permanent one is missed, then selling can be the best alternative.

Who Can You Sell Your Term Life Insurance To in Canada?

• Institutional Buyers: Term Life Insurance Policies are typically purchased by institutional buyers, namely investment firms or life settlement companies, who purchase policies as part of an investment portfolio and pay you a lump sum in exchange for the death benefit.
• Individual Investors: Some high-net-worth individuals invest in life insurance policies, which are bought for less than the death benefit but more than the cash surrender value. It is considered a long-term investment.
• Insurance Brokers: Certain Term Life Insurance Brokers may act as intermediaries in the sale of your policy. They connect you with potential buyers, helping you get the best deal.

How to Sell Your Term Life Insurance Policy

• Eligible Policy: Not all Term Life Insurance Policies are eligible for sale. Policies closer to maturity or those with a conversion option to permanent insurance are more attractive to buyers.
• Consult Term Life Insurance Brokers: Experienced brokers, such as those at Canadian LIC, can walk you through the process of selling it. They evaluate your policy, locate buyers, and negotiate the highest price possible on your policy.
• Determine a Value for Your Policy: A valuation is how much your policy is actually worth. Variables such as the death benefit amount, remaining term length, and age all factor into this number.
• Obtain a Policy Valuation: Once your policy is valued, buyers in the form of institutions and individuals will make offers. You may, through a broker, compare those offers and opt for the most beneficial one.
• Finalize the Sale: After agreeing upon the price, the buyer takes over the policy. At this point, you will receive a one-time payment, while the buyer will be responsible for the succeeding premium payments.

Factors That Affect the Sale of Term Life Insurance Policies

• Policy Type: Policies that include conversion options or longer terms are more valuable to buyers.
• Your Health: Surprisingly, older people or those suffering from health conditions might find it easier to sell their policies. That is because the buyer would be more likely to collect the death benefit sooner.
• Market Demand: The demand for life settlements fluctuates, affecting the price a buyer is willing to pay for a policy.
• Premium Costs: If the premiums are high, buyers will take a back seat as they have to pay for those after acquiring them.

Benefits of Selling Your Term Life Insurance Policy

• Immediate Cash Flow: Selling your policy provides a lump sum payment that can be used for emergencies or other financial goals.
• Avoid Ongoing Premiums: Once the policy is sold, you're no longer responsible for paying premiums.
• Redirect Financial Resources: The funds from the sale can be reinvested in other areas or used to pay down debt.

Drawbacks to Consider Before Selling

• Loss of Coverage: Once the policy is sold, you no longer have life insurance coverage under that policy.
• Lower Payout: The payout is typically less than the policy's death benefit.
• Tax Implications: In some cases, the proceeds from the sale may be taxable.

Why Work With Canadian LIC?

We have guided many of our clients at Canadian LIC regarding the multiple complicated selling processes of their Term Life Insurance. Our Term Life Insurance Brokers will treat you with customized advice, be it sales opportunities or guidance regarding the renewal or conversion process.

For instance, one client came to us after realizing that the premiums on his policy were no longer affordable. With our assistance, he sold his policy to an institutional buyer, securing a payout that helped him cover an unexpected medical expense. This experience underscores our commitment to helping Canadians make informed decisions.

Final Thoughts

Selling your Term Life Insurance Policy can be a practical solution for those no longer needing coverage or struggling with premiums. At Canadian LIC, we're committed to guiding you every step of the way, ensuring you make the best decision for your financial future. Whether you're looking to sell your policy or explore other options, our experienced Term Life Insurance Brokers are here to help. Take the next step today with Canadian LIC, the best insurance brokerage in Canada.

FAQs: Selling Term Life Insurance in Canada

Can I sell any Term Life Insurance policy?

Not all policies are eligible for sale. Policies with a conversion option or those nearing maturity are more attractive to buyers.

How much will I get for my policy?

The payout depends on factors like your policy's death benefit, term length, and your health. Buyers typically offer more for policies with higher death benefits and lower premiums.

Are there tax implications when selling my policy?

Yes, the proceeds from selling a Term Life Insurance policy may be taxable. Consult a tax advisor for guidance.

Can I sell my policy without a broker?

While it's possible, working with experienced Term Life Insurance Brokers ensures you find the best offers and navigate the process smoothly.

Is selling my policy better than letting it lapse?

In most cases, selling your policy is better than letting it lapse, as you receive a payout instead of losing the premiums you've already paid.

Can I sell my policy if I bought it online?

Yes, policies purchased online can be sold, provided they meet the criteria for life settlements.

How long does the selling process take?

Depending on the buyer's evaluation and negotiation timeline, the process can take several weeks.