New Life for Old Life Insurance

You may have bought a life insurance policy when you had small children and a large mortgage. Now that the children have graduated and you have paid off the mortgage, do you still need the policy? Perhaps you bought a policy to help pay estate taxes on the family business, which has since been sold. Are you tired of paying premiums? Should you keep the policy or cash it in? Here are a few ideas to consider.

Sell it
You may do better selling your insurance policy. While many "life settlement" companies have left the market, there are still buyers, says Kevin Smith of The Coventry Group in Fort Washington, Pa. Kevin reports that he recently bought a $250,000 convertible term life insurance policy on a 74-year-old man for $16,000. "We do our own underwriting and discount the value of the policy to come up with a price," Smith says. Coventry bought just under $6 billion in death benefits last year, mostly policies between $2 million and $5 million. A good candidate for selling a policy would be at least 65 years old, have a cash value or convertible policy with a death benefit over $100,000 and be willing to provide five years of medical records.

With the children graduated and the mortgage paid off, that giant life insurance policy, and its giant premiums, may no longer make sense.

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