Secondary Market Life Insurance

If you own a “permanent” life insurance policy (whole life, universal life, variable life), it need not be truly permanent. As long as your children are grown and living on their own while you have sufficient assets to support a surviving spouse, you might not need this policy anymore. In that case, you may want to cash in the policy and stop paying premiums.

Start by asking your insurance agent about the policy’s cash value. That’s how much you’ll collect by surrendering the policy–letting it lapse.

Step two is to ask your agent to get bids from interested buyers. Many investors will purchase your policy, pay premiums to keep the policy in force, and collect the proceeds at your death.

After you have both the policy’s cash surrender value and the highest bid from a buyer, consult with your tax advisor. Find out which transaction will enable you to keep the most cash, after paying taxes.