Purchasing term life insurance is a fairly common procedure for those who have several people financially dependent on them. And once this person passes away, the dependents face many financial difficulties.
It is also common for people to prefer to sell a life insurance policy after having taken it out for a long or short time. But, there is no doubt about one thing: it is not a simple process, and you must know how to do it.
What is the difference between a term and a whole-life policy?
There are two general forms of life policies. And to make sure you understand how to sell a term life policy, you need to understand the differences between the two.
Whole-life policies last until the end of the policyholder’s life, i.e., from the time of enrollment, they last indefinitely. They are cashed in when the policyholder dies, regardless of whether it happens too soon or many years pass.
Term life policies work differently. They last only for the time they were contracted for, and if the policyholder does not die within that time, the policy stops being paid, and the life insurance is not collected.
Know the steps to follow to sell a term life policy
It is necessary to follow a series of steps almost at face value to sell a term life policy without failing in the attempt. Otherwise, the process could become very agonizing and tedious.
Make sure you have a conversion clause
Term life policies are usually not very attractive because no one finds it very interesting to acquire one that could expire without the holder’s death, and therefore, cannot be cashed in. Under that possibility, they could lose their time and money.
However, not all is lost. Term life policies can be extended to a whole life policy, but to do so, one must sign a conversion clause in the insurance contract.
Having signed the conversion clause, the policyholder can request the expansion of their term life policy into a whole life policy. Usually, it would help if they did this before the expiration date, while it is still term.
Converting to a whole life clause is much more attractive to the buyer because they will surely be able to cash it in at some point, eventually.
The insertion of the conversion clause must have been requested or accepted together with the affiliation to the term life policy. Depending on the insurer, the company will charge to activate it.
Gathering all documents related to the term life policy
It is advisable to have gathered all documents related to the policy and medical history to move on to the next step. If you do not have them at hand, you can contact the insurer and request them.
Preferably it would help if you collected them digitally to send them as many times as necessary. They can also be printed, but it is advisable to make several copies to submit them for each procedure.
Start looking for a broker
Brokers, in these cases, are responsible for making the sale of your term life policy known in the market. Although, many prefer to do the process independently due to the high commissions of insurance brokers.
However, if you don’t rely on a broker, the process can take much longer, and still not guarantee to get the sale. For the broker, it is a simpler process because of their extensive experience and track record in this sector.
It is essential to find a broker you trust. It can be somebody recommended by someone you know who has carried out a similar process or somebody found by searching for companies dedicated to making brokers available.
Ideally, clients research more than one broker and interview as many as possible. In doing so, they can review commissions and performance. This way, the policyholder can define whether the commission and its work suit them.
To be on the safe side, the company where the broker comes from must be registered and endorsed by law. Otherwise, you could end up in a bad situation.
Let the broker do their job
The broker will be responsible for listening to and investigating all the offers available for selling your term life policy. They, with their experience, will discard those that seem too unprofitable or inconvenient.
As they do this filtering, they will inform the policyholder of all the possible offers. They will agree and choose the most beneficial offer with their guidance, experience, and the policyholder’s needs and preferences.
It is not a process of just a few hours. It usually requires considerable time and effort, even more so if the policy is to be sold at a good price. Although, it may be just a matter of luck or the quality of the broker.
Finalize the sale and purchase
Once the best offer has been chosen, the broker will contact the buyer and negotiate the rest of the offer. Once the offer is finalized, the client must sign the transfer to conclude the entire sale.
It is in this process that all the documents must be delivered. Upon completion, it will be the buyer who will be responsible for all the corresponding installments.
The seller is completely exempt from paying the policy premiums again and receives the amount corresponding to the transfer of ownership.
Can I sell my term life policy if I don’t have a conversion clause?
Although it is very unlikely to be able to complete the sale of a term life policy without a conversion clause, there may be people interested in meeting a term life policy when the policyholder is very ill or terminally ill.