Understanding whether or not term life insurance policies have cash value is crucial to making the right policy decisions. Whether you’re considering purchasing a term life insurance policy or currently own one and are looking to cash out, it’s important to understand your options and ensure that your beneficiaries are appropriately designated.
This guide will help explain whether your term life insurance policy has cash surrender value, how to sell your term life insurance policy, and more.
Does Term Life Insurance Have a Cash Surrender Value?
No, term life insurance does not have a cash value. Unlike some other life insurance policies (like permanent life insurance), term life insurance does not accrue value over time, but rather, expires once you’ve paid the value of the policy in premiums. This means that if a policy owner outlives the end of a policy, they won’t receive any payout when it expires.
Term vs Cash Value Life Insurance
If you’re in the market for a new policy, understanding the difference between term life insurance and cash value life insurance can help you make an informed decision about which to choose.
Term life insurance is simple and inexpensive. Its primary purpose is to provide a death benefit to the beneficiary, offering fixed monthly premiums for a set period of time, along with predictable coverage in case something happens. Because the premiums are lower and it lacks any investment or savings opportunities, like other policy types, term life insurance won’t accrue any cash surrender value.
On the other hand, cash value life insurance (also known as permanent life insurance, encompassing whole, variable, and universal insurance) accumulates cash value over time. These types of policies operate like investment accounts, and some policies even allow policyowners to borrow money against life insurance to pay for things like mortgage payments.
The downside of these policies is that many come with added fees, and premiums can get more costly as you age. It may seem easier to get cash from a permanent life insurance policy, but rest assured, there are ways to generate cash from a term life insurance policy if you need it.
While cashing out of a term life insurance policy is not always an option, you may still be able to access market value, which is similar to cash value in that you can get cash for your policy by selling it in a life settlement transaction. As you get older, however, provided your health remains stable, you may be looking to generate further value from your term life insurance policy.
Can You “Cash Out” of a Term Life Insurance Policy?
Yes (in a way)! While term life insurance policies can’t be ‘cashed out’ in the traditional sense, you can still get cash from your policy on the secondary market. If you qualify, you can get cash by selling your term life insurance policy to a licensed life settlement provider. Find out if you qualify to sell your term policy now.
How Can You Get Cash from a Term Life Insurance Policy?
Just because your term life insurance policy hasn’t accrued cash value doesn’t mean you can’t still get cash for it. Exploring all available options is important for those who are looking to maximize the value of their term life insurance policies, especially as the policy nears expiration.
Consider Selling Your Term Life Insurance for Cash
If you no longer need your term life insurance policy, are approaching the term conversion deadline, or can no longer afford the premiums, consider cashing out term life insurance through a life settlement. This is a financial transaction in which a policyowner sells their policy for cash or a combination of cash and coverage with no future premiums.
For example, we recently received a call from a term life policy owner with a $1,000,000 policy. After being diagnosed with a serious illness, she needed help covering her medical expenses. She saw a commercial for Coventry Direct and decided to learn more about life settlements. The policy owner received $81,500 for her term life insurance policy, which had no cash value. She used the proceeds to take care of her mounting medical bills as well as her daughter’s educational expenses, giving her the peace of mind she needed to enjoy time with her loved ones.
Frequently Asked Questions About Cashing In Term Life Insurance
Below are some of the most common questions we get asked about term life insurance and cashing out life insurance policies.
If term life insurance doesn’t have a cash surrender value, which insurance does?
Permanent life insurance policies will sometimes accrue a cash surrender value if there is a savings or investment component and you haven’t taken a loan or otherwise withdrawn or diverted the cash value somewhere else, such as for premium payments. Policies that build cash surrender value can include universal or whole life insurance policies.
Term life insurance has value, but not in the same way. Whereas permanent policies can generate cash surrender value within the account, term policies derive their value from what licensed life settlement providers are willing to pay for the policy.
How much can I sell my term life insurance policy for?
The amount you can sell your term life insurance policy for depends on the specific terms of the policy agreement, the insured’s age and health, and the willingness of the provider to invest in the policy. The amount you receive can vary greatly depending on these factors.
Can I convert a term life insurance policy?
Yes, you can often convert a term life insurance policy into a permanent life insurance policy, depending on the terms of your specific policy and the options offered by your insurance provider.
Can you borrow cash from a term life insurance policy?
While you can typically borrow cash from a permanent life insurance policy, term life insurance is a different story. Term life insurance does not have a cash value or a savings component, so there’s no cash to borrow against. Permanent life insurance policies, such as whole life or universal life, accumulate cash value over time, which can be borrowed against through policy loans.
Does Coventry Direct Buy Term Life Insurance?
Yes, Coventry Direct does buy term insurance for qualified individuals. To learn more about life settlements for term life policies, or to find out if you qualify now call (800) 268-3687.
