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What Happens to Your Life Insurance Policy After You Sell It?
By Saul L. Appel, CLU®, ChFC®
When a life settlement closes, the buyer generally becomes the policyowner and beneficiary. The buyer is then responsible for paying future premiums and receives the death benefit when the insured dies.
The original policyowner receives the agreed cash settlement and gives up control of the policy and its death benefit. That means the former beneficiaries will no longer receive the proceeds from the sold coverage. Before accepting an offer, the owner should decide whether any life insurance is still needed for family, estate, or business purposes.
The insurance carrier must record the ownership and beneficiary changes. Buyers may periodically request limited health-status updates after the sale, subject to the transaction documents and applicable law. Personal and medical information should be handled confidentially and only with proper authorization.
A reputable closing process uses clear contracts, required state disclosures, and secure handling of funds. Many transactions also use an escrow agent so the ownership change and payment occur in an orderly manner. Some states provide a rescission period during which the seller may cancel under specified conditions.
Selling a policy is permanent once the transaction and any rescission period are complete. The owner should understand the price, taxes, effect on beneficiaries, privacy provisions, and alternatives before signing.
For a confidential review, visit Policy-Cash.com.
Saul L. Appel, CLU®, ChFC® | President, Appel Financial, Inc. | 50+ years experience