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One of the most frequently asked questions is, is it possible to sell a life insurance policy in Australia when you no longer want it?
This question is relevant because in Canada for example, it is only legal to sell your life insurance policy in four Canadian provinces. Looking at the empirical evidence in the United States and Canada, there is no indication that selling your life insurance will become any easier in the future.
A life settlement is the process of selling your life insurance to a third party if you think you no longer need it. This is because there are times when you may have to rethink your life insurance needs.
But then let’s talk about what a life insurance policy is, how life insurance works, exactly how you sell life insurance and the advantages and disadvantages of selling life insurance.
shall we?
What is life insurance and why do you need it?
A life insurance policy is a type of policy that pays the beneficiary a death benefit after the death of the policyholder or after a specified period of time. The importance of buying life insurance today is that it helps your dependents not suffer financially when you die.
They won’t have to bother with where to collect money for your funeral or how to take care of your debt because your death claims will work it out.
However, if you do not want your life insurance policy for any reason, you can sell it to a third party but at a lower price than it is actually worth.
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When should I sell a life insurance policy?
Policyholders in Australia decide to sell their insurance for any of the following reasons:
- When you can’t afford to pay your premium.
- You may choose to sell your life insurance policy when you have enough savings and assets that can take care of your family and personal debts after your death.
- When you no longer have financial dependents and have paid off your mortgage.
- You want to direct the proceeds into a profitable business that is guaranteed to succeed.
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What is the process of selling life insurance in Australia like?
Before we discuss what the process of selling life insurance to a third party looks like, please understand that you immediately sell your life insurance, and the new policyholder starts paying premiums. As a result, they will become entitled to all death benefits at your death (not at their death).
Given how delicate this business transaction is, you may need to hire a life insurance broker to help you sell your life insurance policy. If your insurance company is barely buying the insurance policy, you’ll need to keep looking for a buyer — which is often difficult to get, including the legal implications.
Once the new policyholder has taken over the premium payments, always check in to remind them that you are still alive so they can continue to renew their premiums.
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The detailed guide to selling a life insurance policy in Australia
If you are still interested in moving forward with a life settlement, here are the steps for selling your life insurance to a new policyholder in Australia:
1. Double-check your state’s insurance laws and insurance company’s guidelines
Your state’s insurance laws or the way a life insurance company operates may impose rules about when and if you can sell your policy. It’s always good to know from the start. For example, you may need to be over 65, or have a policy of at least $100,000. Only 4 provinces in Canada allow you to sell your life insurance
2. Find a reliable buyer
If you’re looking to bypass brokerage fees, you can either find a buyer or choose a lifetime settlement provider to connect you with potential buyers. Trying to bypass brokerage fees can make your chances of finding a buyer more difficult. It is a serious financial risk so they need to be sure that they are making the right decision.
3. Evaluate your policy
Your insurance company may do this for free, while a life settlement broker may expect you to use their brokerage services for a reasonable fee. It all depends on how fast you want it and how much you think it will be worth so you don’t get looted.
4. Compare different offers
Don’t jump in and sell right away you get the first offer. Wait for a competitive offer before selling. As they say in business, patience is a great virtue. You may need to notice when a life insurance policy is at an all-time high and liquidate it at a very profitable rate.
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