Sell your life insurance policy for cash

[QuarterMillionMan]

I just saw a commercial where let's say a 70's couple sold their $300,000 life insurance policy for $30,000 cash. Or another 70's couple sold their $2 million life insurance policy for $200,000 cash. I don't have life insurance but would you sell your life insurance policy for about 10% in cash?

[ua_guy]

I think people make choices that aren't great choices when they're stuck in a bind. Mostly because the choice is forced when there are no good options. I could see someone in their 70's selling their policy for pennies if they suddenly needed money -- but how did they get into that situation in the first place?

Otherwise, no, the idea behind life insurance is to leave additional money behind for someone who depends on you being alive. I'd much rather the beneficiary receive what's spelled out in the policy and the way we planned it.

[QuarterMillionMan]

I'm in a different situation where no one is dependent on me so if I had a $300,000 life insurance policy at 60 years old, I would take the $30,000 in cash.

[ua_guy]

I could see that. One thing I'd check into, if this were my situation, is if I could somehow convert it into a Long Term Care policy if I thought that could be more beneficial. A lot of it would depend on what the surrender, life settlement value, or how much a LTC conversion policy could actually provide.

[disneysteve]

I'm in a different situation where no one is dependent on me so if I had a $300,000 life insurance policy at 60 years old, I would take the $30,000 in cash.

If you have no one dependent on you, you have no need for life insurance.

These "deals" are for people who got sucked into whole life policies. If you did it right and bought term coverage, this doesn't apply to you.

[disneysteve]

One situation where this might make sense is if you bought whole life (which is a mistake, but you did it anyway) to provide for your beneficiary but then that person died before you. Now you've got this expensive policy that you don't need anymore. In that case, selling it for the cash might not be a terrible idea if you have nobody else you'd like to leave the money to and you could use the cash.