Have you ever considered that your life insurance policy, like other assets, might have a hidden value you can access while you're still alive? Many people don't realize that a MetLife life insurance policy, especially a permanent one like whole life or universal life, can be sold for cash. This process is called a life settlement or, in specific health circumstances, a viatical settlement. It can be a significant financial solution for those who no longer need their policy, can't afford the premiums, or need funds for various life events.
Let's dive into the details of whether you can sell your MetLife life insurance policy and the step-by-step process involved.
Can I Sell My MetLife Life Insurance Policy? The Short Answer is Yes!
Your life insurance policy is legally considered a personal asset, similar to your home or car. This means you have the right to transfer its ownership if you choose. While MetLife won't buy your policy directly back for its full death benefit (they'd offer the "cash surrender value" if you cancel it), you can sell it to a third-party buyer through a specialized market. These buyers are typically licensed life settlement providers or institutional investors.
The amount you receive in a life settlement is generally higher than the policy's cash surrender value but less than the total death benefit. This makes it an attractive option compared to simply surrendering the policy, which often results in a much smaller payout.
Step 1: Understand Why You Might Consider Selling
Before embarking on the process, it's crucial to evaluate your reasons for selling. This will help you determine if a life settlement is the right path for your financial situation. Ask yourself:
Do you still need the coverage? Perhaps your dependents are grown, your mortgage is paid off, or your financial obligations have decreased.
Can you still afford the premiums? Rising premiums can make keeping a policy financially burdensome, especially in retirement.
Do you need cash for other expenses? This could include medical bills, long-term care costs, unexpected emergencies, or even funding a new business venture.
Are there better investment opportunities for your money? The cash from a settlement could be invested elsewhere for potentially higher returns.
Step 2: Determine Your Eligibility and Policy Type
Not all life insurance policies qualify for a life settlement, and certain factors influence the potential payout.
Sub-heading: Policy Type Matters
Permanent Life Insurance: Policies like whole life and universal life insurance are generally more likely to qualify for a life settlement because they build cash value over time. The accumulated cash value is a significant factor in determining the policy's worth to a buyer.
Term Life Insurance: While less common, some term life policies, especially those that are convertible to a permanent policy, might qualify. If the insured has a chronic or terminal illness, a non-convertible term policy might also be eligible for a viatical settlement.
Sub-heading: Key Factors Influencing Your Policy's Value
Life settlement providers will assess several factors to determine an offer for your MetLife policy:
Your Age and Health: Generally, older individuals or those with declining health (a shorter life expectancy) tend to receive higher offers. This is because the buyer will likely pay premiums for a shorter period before receiving the death benefit.
Policy's Face Value (Death Benefit): Policies with a higher death benefit typically command a larger settlement.
Premium Schedule and Payments: The amount of future premiums the buyer will need to pay impacts their offer. Higher future premiums generally lead to a lower cash offer.
Cash Surrender Value: While you'll aim for more than this, the existing cash surrender value of your policy is a baseline consideration.
Step 3: Gather Your MetLife Policy Information
To get accurate quotes, you'll need to provide comprehensive details about your policy.
Policy Number: This is crucial for identifying your specific MetLife policy.
Policy Documents: Have your original policy contract and any riders or endorsements readily available.
Premium Illustration: This document outlines your premium payment schedule and projected cash values. You can usually request this from MetLife customer service.
Medical Records: You'll need to authorize the life settlement provider to access your medical records to assess your current health and life expectancy.
Beneficiary Information: Details about your current beneficiaries will be required as part of the ownership transfer.
Step 4: Explore Your Options: Life Settlement vs. Viatical Settlement
It's important to understand the distinction between these two types of settlements, as eligibility and tax implications can differ.
Sub-heading: Life Settlement
A life settlement involves selling your existing life insurance policy to a third party for more than its cash surrender value but less than its death benefit. This is typically for policyholders who are not terminally ill but may be older or have a changed financial situation. The buyer becomes the new owner and beneficiary, taking over premium payments and receiving the death benefit upon the insured's passing.
Sub-heading: Viatical Settlement
A viatical settlement is a specialized type of life settlement for individuals who are terminally or chronically ill, generally with a life expectancy of two years or less. Because of the shorter life expectancy, the payout tends to be a higher percentage of the death benefit. This option provides immediate cash to help with medical expenses, living costs, or to improve quality of life during a difficult time.
Step 5: Find a Reputable Life Settlement Provider or Broker
This is a critical step in the process. You'll want to work with a licensed and experienced professional.
Life Settlement Provider: These are companies that directly purchase life insurance policies. They will make an offer to you directly.
Life Settlement Broker: A broker acts as your representative, shopping your policy to multiple life settlement providers to help you secure the highest possible offer. They work on your behalf and are compensated by the buyer. Using a broker can be beneficial as they have access to a wider market.
Sub-heading: Due Diligence is Key
Check Licensing: Ensure any provider or broker you consider is licensed in your state. Life settlements are regulated at the state level.
Read Reviews and Testimonials: Look for companies with a strong track record and positive client feedback.
Understand Fees and Commissions: Ask for a clear breakdown of any fees or commissions involved before you commit.
Don't Feel Pressured: You are not obligated to accept any offer you receive. Take your time to review all options.
Step 6: Submit Your Application and Await Offers
Once you've chosen a provider or broker, you'll formally apply for a settlement.
Complete the Application: This will involve providing all the policy and medical information you gathered in Step 3.
Underwriting Process: The provider will then undergo an underwriting process, similar to when you initially purchased the policy, to assess the risk and determine a fair value. This involves reviewing your medical records and other relevant information.
Receive Offers: If your policy qualifies, you'll receive a cash offer (or multiple offers if you're working with a broker).
Step 7: Review and Accept (or Decline) the Offer
Carefully evaluate any offers you receive.
Compare Payouts: If you have multiple offers, compare the cash amounts.
Consider Terms and Conditions: Understand any stipulations or conditions attached to the offer.
Seek Financial and Tax Advice: It is highly recommended to consult with a financial advisor and a tax professional before accepting any offer. They can help you understand the long-term financial implications and the tax consequences of selling your policy.
Step 8: Complete the Transfer of Ownership
If you accept an offer, the final steps involve the legal transfer of the policy.
Sign the Life Settlement Agreement: This legally binding document formalizes the sale.
Transfer Ownership and Beneficiary Rights: The ownership of your MetLife policy and the beneficiary designation will be transferred to the life settlement provider.
Receive Your Funds: The settlement proceeds will typically be placed in an escrow account with an independent bank to ensure the safety of the funds during the transfer. Once the transfer is complete, the cash payment will be disbursed to you.
Important Considerations and Alternatives
Selling your life insurance policy is a significant financial decision with various implications.
Sub-heading: Tax Implications
The proceeds from a life settlement may be taxable. Generally:
Up to your "cost basis" (premiums paid): This portion is usually tax-free.
Between your cost basis and the cash surrender value: This portion is typically taxed as ordinary income.
Exceeding the cash surrender value: This gain is often taxed as a capital gain.
Always consult a tax advisor to understand your specific tax liability, as laws can vary and your individual situation matters.
Sub-heading: Impact on Public Assistance or Medicaid
Receiving a large cash payout from a life settlement could potentially impact your eligibility for certain public assistance programs like Medicaid or Supplemental Security Income (SSI). It's crucial to investigate this with a social services professional if you rely on such benefits.
Sub-heading: Alternatives to Selling Your Policy
Before selling, consider these other options, especially if you have a cash-value policy:
Policy Loan: You might be able to borrow against the cash value of your MetLife policy. You'll need to repay the loan with interest, but your coverage remains intact. Unpaid loans will reduce the death benefit.
Cash Value Withdrawal: You may be able to withdraw a portion of your policy's cash value. This will reduce your death benefit and potentially incur surrender charges.
Reduced Paid-Up Option: For permanent policies, you might be able to use the existing cash value to purchase a smaller, fully paid-up policy, meaning you stop paying premiums but retain some coverage.
Accelerated Death Benefits (ADB): If you are terminally or chronically ill, your MetLife policy might have an accelerated death benefit rider, allowing you to access a portion of your death benefit while you're still alive. This is typically tax-free.
Lapse or Surrender: You can simply stop paying premiums (letting the policy lapse) or surrender the policy for its cash surrender value. Be aware that the surrender value is usually significantly less than a life settlement.
Frequently Asked Questions
How to determine if my MetLife policy has cash value?
You can determine if your MetLife policy has cash value by reviewing your annual policy statements, logging into your online MetLife account, or contacting MetLife's customer service directly. They can provide a current cash value statement.
How to find a licensed life settlement broker or provider?
You can find licensed life settlement brokers or providers through your state's Department of Insurance website, which often lists licensed entities. Industry associations like the Life Insurance Settlement Association (LISA) also maintain directories of members.
How to calculate the potential value of my MetLife policy for a settlement?
While there's no exact formula you can use yourself, life settlement providers or brokers will calculate the potential value based on your age, health, policy type, face value, and future premium obligations. The best way to know is to get quotes from multiple sources.
How to ensure I'm getting a fair offer for my policy?
To ensure a fair offer, work with a licensed life settlement broker who can shop your policy to multiple providers. Compare all offers carefully and consult with an independent financial advisor to assess if the offer aligns with your financial goals.
How to protect my privacy during the life settlement process?
Reputable life settlement companies are bound by privacy regulations. Ensure you're working with licensed entities that clearly outline their data privacy policies. Only provide information necessary for the evaluation and settlement process.
How to deal with the tax implications of a life settlement?
Consult a qualified tax advisor before accepting any life settlement offer. They can explain how the proceeds will be taxed based on your specific situation and current tax laws, helping you plan accordingly.
How to inform my beneficiaries if I decide to sell my policy?
It's advisable to have an open conversation with your beneficiaries about your decision to sell your life insurance policy. Explain your reasons and how you plan to use the proceeds, as they will no longer receive the death benefit.
How to compare a life settlement to other alternatives like policy loans or withdrawals?
Compare the immediate cash received from a life settlement against the amount you could borrow or withdraw, and weigh the impact on your remaining coverage. Consider the interest rates on policy loans versus the complete surrender of the policy's death benefit in a settlement.
How to handle MetLife's specific procedures during the transfer of ownership?
Once you accept an offer, the life settlement provider will typically handle the administrative procedures with MetLife to transfer ownership and beneficiary designation. You may need to sign specific forms provided by the settlement company.
How to rescind a life settlement if I change my mind?
Most states provide a "free look" or rescission period, typically 15 to 30 days, during which you can cancel the life settlement contract after receiving the proceeds. Review your contract carefully for the specific terms of your rescission rights.
