Can you Cash in Term Life Insurance?

Published October 10, 2019

Senior couple sitting on couch looking at laptop with a surprised expression

Whether you’re considering purchasing a term life insurance policy, or currently own one and are looking to what’s next as you approach the expiration date, it’s important to understand your options.

This post answers common questions like “Does term life insurance have a cash value?,” along with some avenues you can take if you don’t want to let an existing policy go to waste.

Term Life Insurance Does Not Have a Cash Surrender Value

Term life insurance is a “temporary” form of life insurance, meaning that it’s only valid for a predetermined number of years, and since there’s no investment vehicle built-in, it does not accrue cash surrender value like permanent policies sometimes do. Rather, term policies will expire at the end of the covered term, leaving the policyowner empty-handed in most cases.

Unlike policies that build a cash surrender value over time, term policies are generally much more affordable and are typically more straight-forward than permanent policies.If you purchase term life insurance when you’re young and healthy, this type of policy can work in your favor by providing sufficient coverage for beneficiaries in the event of an early death. As you get older, however, the downside of term policies becomes more evident.

Why Doesn’t Term Life Insurance Have a Cash Surrender Value?

Term life insurance is simple and inexpensive. It offers 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, permanent life insurance policies (encompassing whole, variable and universal insurance) accumulate cash value over time. These types of policies operate like investment accounts, and some policies even allow policyowners to borrow money against the policy value 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. Read on if you’re wondering how to determine the cash value of a term life insurance policy.

How Can You Get Cash from a Term Life Insurance Policy?

Don’t make the mistake of thinking that your term life insurance policy has no present value just because it hasn’t accrued cash value. 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 the Term Life Insurance

If you no longer need your term life insurance policy, are approaching the term conversion deadline, or can no longer afford the premiums, you could consider selling the policy 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 policyowner with a $1,000,000 term 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 policyowner received $81,500 for her 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 family.

Frequently Asked Questions About Term Life Insurance

Below are some of the most common questions we get asked about term life insurance and cashing out life insurance policies.

Can you cash in on a term life insurance policy?

Yes! If you qualify, you can get cash from your term policy by selling it to a licensed life settlement provider. While the value isn’t derived from the cash surrender value (since term policies don’t accrue cash surrender value), there could be value on the secondary market. Find out if you qualify to sell your term policy now.

Which life insurance has cash value?

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.

To learn more about life settlements for term life policies, or to find out if you qualify now call (800) 268-3687.

Editorial Disclaimer: Coventry Direct, a member of the Coventry group of companies, educates policyowners and insureds interested in learning about life settlements. Resources and publications are researched, written and updated by in-house experts to reflect the most up-to-date industry knowledge.

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