Knowing what to do with an old life insurance policy can be tricky. Whether you’ve been holding onto an old life insurance policy year after year, you’ve come across an old life insurance policy you had forgotten about, or you’re trying to help a loved one with their life insurance policy, there’s likely value locked away in the policy ready to be discovered.
As you dive headfirst into finding out just how much the old life insurance policy may be worth, there are a few key points to consider. First, old life insurance policies are worth something. There are ways to unlock value within your old policy,such as selling it in a life settlement, so it’s time well spent investigating just how much value the policy holds. Second, there are several avenues to evaluate when determining the value of the old life insurance policy. Persistence and patience are key when considering all of your options to extract value from the old policy. Third, there are significant benefits to maintaining an existing policy, which we’ll discuss in this blog post.
As the #1 ranked life settlement provider and the creator of the life settlement industry, Coventry has experience working with folks just like you to unlock value within an old life insurance policy. Let’s explore where to begin with your old life insurance policy!
Key Takeaways
- Do old life insurance policies hold any value? Old life insurance policies often hold more value than you might expect. By exploring options like selling the policy in a life settlement, you can uncover significant financial benefits.
- How can I learn how much my policy is worth? Thoroughly search for policy details, contact insurance companies, and utilize resources like the NAIC’s Life Insurance Policy Locator Service and NAUPA’s search tool to navigate the process.
- What can I do with an old life insurance policy I don’t want? If your policy doesn’t have substantial cash value, consider alternatives such as selling it in a life settlement or exploring a viatical settlement if you’re chronically or terminally ill to maximize the financial benefits from your old policy.
How To Find an Unclaimed Life Insurance Policy
Before uncovering hidden value within a life insurance policy, it’s important to have the policy details in front of you. If you find yourself stuck locating an unclaimed life insurance policy, there are a few paths to take to find the policy details:
- Review documents and paperwork you currently have. If you have any details about the policy at all, start there. You may need to dive into old filing cabinets to retrieve any paperwork related to the policy. Look for policy documents, premium payment receipts, or any correspondence from the insurance company.
- Use the NAIC’s online Life Insurance Policy Locator Service. The National Association of Insurance Commissioners (NAIC) offers a helpful online tool called the Life Insurance Policy Locator Service. This service can assist in locating lost or unclaimed insurance policies. You can access this easy-to-use tool on the NAIC’s official website.
- Seek guidance from a financial advisor or accountant. If you or the policyowner has a financial advisor or accountant, they may have information about any life insurance policies in place. They can help you navigate through financial records and provide insights into any overlooked policies.
- Conduct a free search with NAUPA. The National Association of Unclaimed Property Administrators (NAUPA) provides a free online search tool where you can check for unclaimed property, including life insurance policies. This can be a valuable resource in uncovering any forgotten policies that you or your loved one owns.
- Get in touch with previous employers. Tapping into your previous employment network could also be a great place to seek information. Because some employers offer group life insurance policies as part of their benefits package, you may have had coverage through your former employer. Reach out to the human resources department or benefits administrator to inquire about any existing policies in your name or your loved one’s name.
- Contact the state insurance department. Each state has its own insurance department, which regulates insurance companies operating within its jurisdiction. Contacting the state insurance department can help you verify the existence of a life insurance policy and gather relevant information.
How to Determine if an Old Life Insurance Policy Is Worth Anything
Now that you’ve gotten your hands on critical policy documentation, it’s time to figure out whether your old life insurance policy is worth anything. Here are the next steps you can take to assess your policy’s value.
Contact the Insurance Company
Begin by contacting the insurance company listed on the policy documents. Share the policy details with them and ask about the current status of the policy. While you’re gathering policy information from the insurance carrier, you can inquire about the following to gather information about the policy’s liquid worth:
- Death Benefit Amount: If your policy has a death benefit of more than $100,000, then you may be able to sell the policy in a life settlement for a cash payout.
- Cash Surrender Value: If the policy has any cash surrender value, you may be able to collect it in a cash payout by canceling the policy. However, it’s worth evaluating whether your policy is eligible to sell in a life settlement before collecting the cash surrender value, since a life settlement payout is, on average, four times the payout of the cash surrender value.
- Policy-In-Force Document: Gathering this document can help you evaluate whether the policy is eligible to be sold in a life settlement. It includes the financial structure of your policy, allowing third-party buyers to determine a fair valuation for the policy.
- Outstanding Loans or Withdrawals: If your policy has any outstanding loans or withdrawals, the policy’s value may be lower to compensate for the borrowed or withdrawn amount.
Verify The Policy Status
Another important piece of information you’ll want to gather from the insurance carrier: the policy status. The insurance carrier will be able to confirm if the policy is active, lapsed, or surrendered.
If the old policy is still active, you can pursue options such as selling the policy to receive a cash payout. Can you get money back from a lapsed life insurance policy? If the policy is inactive, you can inquire about the possibility of reinstating it. Reinstating a lapsed or inactive life insurance policy could be worth it if the policy is eligible to be sold in a life settlement. Finally, if the policy has been surrendered, then there’s no cash value left in it.
Consider Alternative Options
If, after gathering details about your old life insurance policy, you find that it is still active, you may want to explore alternatives to keeping it. Here are two options to consider:
- Sell your policy for cash in a life settlement. In a life settlement, you can sell a life insurance policy that you own for a cash payout. The third-party buyer assumes ownership of the life insurance policy and is responsible for paying the premiums. In exchange for ownership, the buyer pays you a fair, agreed-upon amount in cash.
- Explore a viatical settlement. If you are chronically or terminally ill, you could qualify for a viatical settlement. Similar to a life settlement, this type of financial transaction occurs when a third-party buyer purchases your life insurance policy from you. In exchange, you receive a cash payout to use for medical expenses or other needs in your life.
How Much Could I Sell My Insurance For?
The payout amount of a life settlement depends on a number of factors. To better understand how a life settlement provider may evaluate the value of your life insurance policy, here’s a list of variables they consider when determining a fair price to offer for your policy:
- Age: Policyowners who are 65 years or older typically qualify for a life settlement; however, younger policyowners may also qualify if other factors are met. Oftentimes, the older you are, the more valuable your policy may be.
- Health: Life settlement companies also search for a decline in health since you first purchased your life insurance policy to determine the life settlement payout value.
- Policy Death Benefit: To qualify for a life settlement, your life insurance policy must have a death benefit of $100,000 or more. The higher your death benefit, the higher your potential life settlement offer may be.
- Type of Policy: Depending on the type of policy you have — permanent life insurance or term life insurance —can impact the payout value of your life settlement.
- Policy Structure: Depending on the structure of your life insurance policy, its value may vary, influenced by factors such as premium payment terms, whether it has a cash value account, the amount in the cash value account, and other considerations. The Policy-In-Force document can help the life settlement provider better understand the makeup of your policy and provide a fair valuation for your offer. You may be wondering, “How do I find the cash value of my life insurance policy?” The life insurance provider should be able to tell you how much cash value you have in your policy or provide you with a calculator to determine how much cash value your policy has.
Before entering a life settlement, it’s important to understand three key things:
A life settlement can take some time. Selling your life insurance policy can take some time due to the qualification process. First, you’ll want to evaluate life settlement providers to ensure you’re working with a trustworthy provider that’s accredited in your state. Then, you’ll need to find out whether you qualify for a life settlement and work with the provider to grant them access to necessary medical and policy documentation. These documents help the life settlement provider determine how much to offer you for your life insurance policy. Once you receive an offer, there’s a period of changing policy ownership from you to the life settlement company. During that time, your life settlement payout remains in escrow until the final i’s are dotted and t’s are crossed. When the policy ownership has been transferred, you receive your life settlement payout in cash!
You no longer pay premiums after the sale of your policy. When you sell your life insurance policy to a life settlement provider, they take over the premium payments moving forward, freeing you of any premium payment obligations. It’s essential to continue making premium payments until the policy is sold to ensure it remains intact and doesn’t lapse.
The death benefit goes to the life settlement provider. Since the life settlement provider takes over the premium payments of your policy, they are the ones who receive the death benefit upon your passing. Sometimes, a life settlement provider will allow a retained death benefit, allowing you to pass along a portion of the death benefit proceeds to your beneficiaries. However, engaging in a retained death benefit can reduce the amount of your life settlement cash payout.
Frequently Asked Questions
Deciding how to move forward with your old life insurance policy is a highly personal decision. Whether you choose to hold onto it or sell it in a life settlement, you may find yourself asking the following questions:
How long does it take to build cash value on a life insurance policy?
It can take a considerable amount of time to build up the cash value within a life insurance policy. Oftentimes, a life insurance policy doesn’t begin to build value until two to five years into ownership. After that period, a portion of your premium payments is added to your cash value account and begins to grow over time.
When should you cash out a life insurance policy?
Deciding to cash out a life insurance policy is a highly personal decision that depends on the needs of the policy owner. A policy owner may decide to sell their life insurance policy if they determine they no longer need or want the policy and would rather use the investment toward retirement, health, or other personal expenses.
How much cash is a $100,000 life insurance policy worth?
You may be wondering, “How much is my life insurance policy worth?” The truth is, there are a number of factors that can determine the value of a life settlement payout. The best way to determine how much cash your $100,000 life insurance policy is worth is to get a life settlement evaluation of your policy. Our expert team can help guide you in the right direction to see whether you qualify for a life settlement.
How long can a life insurance policy go unclaimed?
The good news: there’s no set time limit on collecting unclaimed life insurance money. The bad news: life insurers don’t hold onto unclaimed policies indefinitely. If roughly three years or more have passed since the policy owner died and you’re the beneficiary, you’ll need to work with the state to claim the death benefit.
If you have additional questions about the life settlement process, you can see more FAQs here.
Conclusion
As you make a plan for your old life insurance policy, remember that there may be more value than meets the eye. With a little bit of time and evaluation, you could find yourself with a substantial windfall that you previously didn’t know you had access to. Persistence and patience are crucial throughout this process. With the guidance of professionals and tools like the NAIC’s Life Insurance Policy Locator Service and NAUPA’s search tool, you can navigate the complexities of your old policy and make informed decisions to secure the best possible outcomes. An old life insurance policy is often worth more than you might expect, and exploring its potential in a life settlement can be a rewarding endeavor. Reach out to our life settlement experts to find out if your old life insurance policy still has a bit of life left! Get qualified today.
