What Are The Advantages And Disadvantages Of Selling A Life Insurance Policy?
Life insurance is a way of exchanging a small monthly premium for a significant sum of money if you die while the policy is active. This article discusses the advantages and disadvantages of selling a life insurance policy.
The primary advantage of life insurance is the tax-free lump sum that is paid out to your beneficiaries if you die. This payout ensures that your loved ones won’t be financially strained and can afford everyday expenses. Additionally, purchasing life insurance is the best way to ensure immediate financial protection for your loved ones when you die. The payout does not have to go through probate court like other assets might, so there’s less of a waiting period for your beneficiaries to receive the money.
Term life insurance is an affordable option for most people. A term life policy is meant to last until your financial responsibilities have diminished, like when your dependents are grown or you’ve paid off your mortgage. You can make your life insurance coverage even more robust by adding life insurance riders. Riders are optional add-ons to a life insurance policy that provide coverage in unique situations. For example, a disability income rider provides you with a monthly stipend if you become unable to work due to a disability, and a long-term care rider takes money out of your death benefit to pay for long-term care expenses.
One disadvantage of life insurance is that whole life insurance is costlier than term life insurance — you’ll end up paying five to 15 times more toward premiums. Additionally, the cash value component of whole life insurance doesn’t yield as high of a return as a traditional investment account. The biggest disadvantage of term life insurance is that your coverage expires after a set period of time.
Overall, life insurance is a key component of your financial plan during your peak earning years, or until you have fewer financial obligations, so your loved ones wouldn’t suffer a financial loss without you. Selling a life insurance policy can be a viable option if you no longer need the coverage or if you need cash. But before you make any decisions, you should speak with a financial planner and a licensed agent to determine if it is the right choice for you.
|Provides financial protection for loved ones||Whole life insurance is costlier than term life insurance|
|Tax-free lump sum payout||Term life insurance coverage expires after a set period of time|
|Immediate financial protection for loved ones|
|Term life insurance is an affordable option|
|Life insurance riders provide coverage in unique situations|