Can you really sell your Life Insurance policy in Canada?
Selling a life insurance policy makes sense only if you or your loved one is nearing death, and you could use the cash to pay for senior care or possible funeral expenses.
But is it really possible to sell your life insurance policy in Brampton, Mississauga or Toronto? Well, it depends!
Life Settlement – What is it?
A life settlement is when an insured individual sells his/her policy to a third party.
The sale is done for more than the cash surrender amount but less than the total death benefit. The policy holder receives a lump sum amount immediately as a result of the sale. The purchaser pays the remaining monthly premiums and receives the entire monetary benefits after the death of the initially insured person.
A Case study
Steffie is 70 and money has become a problem.
Her monthly life insurance premium of $150 is no longer affordable on her $50,000 Permanent Life Insurance plan. Her estimated life expectancy is 10 more years. So, she will still have to pay a total premium amount of $18,000 for those 10 years.
In case she opts to cancel the policy, she forfeits all the premium amounts, and her beneficiary will not receive any death benefits. She will receive her cash surrender value, but it will be significantly small in comparison to the entire death benefit payout.
The life settlement process allows Steffie to sell her policy to a third party and receive some important cash, freeing her from future premium payments. The buyer will offer her an amount less than the death benefit minus her future premium amounts.
In the case of Steffie, the buyer may offer her something between $10,000 to $15,000, and receive the full $50,000 after Steffie’s death.
Is it really possible to sell a life insurance policy in Canada?
The process is a bit complicated in Canada.
In places like New Brunswick, Quebec, and Nova Scotia, the process is legal. Attempts were also made in Ontario to make this process legal, but it was opposed by most insurance companies because it is less profitable.
Do you have any alternative to selling your life insurance?
Yes, there are feasible alternatives.
- Life insurance policy transfer
While it may be illegal to sell your policy to a third party, it is legal to change the holder of the policy, without altering the beneficiary.
- Loans against the policy
The life insurance companies would rather make it easy to get some death benefits ahead of time rather than dealing with a life settlement.
A policy loan will give you an access to death benefits ahead of time.
- Compassionate payment
Most life insurance companies offer a compassion payment option.
After terminal diagnosis, a compassionate payment is made by the life insurance company before the individual passes away.
A compassionate payment reduces the total amount of your death benefit but the payment is not taxed, which is a benefit on its own. The monthly premiums also need to be paid through.
Final Word
As you can see, selling a life insurance policy in Mississauga or Toronto is not legal. However, there are alternative options that can be pursued.
Consult an experienced financial advisor for more details.
Find a life insurance advisor in Brampton, Mississauga, Toronto, Hamilton
Our expert life insurance advisors can help you determine the appropriate coverage amount, considering a number of factors like your income, debts, net worth, existing plans, current health conditions, etc.
At Trust Life & Investments, we are all about providing affordable insurance options for our customers in Canada. We have over 30 years of experience providing expert insurance and investment advice for both businesses and individuals. Get in touch with our expert financial advisors to know more about the best and affordable Life Insurance Plans in Toronto and Mississauga.