Here's why you might want to sell your life insurance policy for cash

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You bought life insurance to provide financial security coverage for your loved ones after you die, but what if you don't need it or just can't the more you afford it?

Did you know it can be turned into cash in your lifetime to get you out of a financial crisis? You could even use it to create extra income for your golden years.

It's true. You can sell your life insurance policy like any other private property. This transaction is called a life settlement.

Perhaps you need money to cover a large (and unexpected) expense or just want to get rid of the monthly premium. Often, a life settlement is the only lifeline for many seniors who struggle to cover piles of medical bills after falling seriously ill or needing long-term care in retirement.

Those who don't know about this option end up selling their car or house or running up huge debt paying for their care, not knowing that their insurance policy could pay them the same (or more) amount of money than what their vehicle is worth or the total equity in their property.

If you ever think you're going the same way, don't. Selling your life insurance policy to a person or entity can be a smart decision, depending on your particular situation. Knowing how to sell it and determining if it's even the right move for you is essential for your financial future.

Related: Life Insurance: What to Consider as a Business Owner

Understanding the Rule of Life: What is it and how does it work?

A life settlement is the sale of your life insurance policy to a third party for a lump sum less than the net death benefit but greater than the cash surrender value.

Sellers usually receive a lump sum, then the buyer takes responsibility for the policy, pays the premiums, and receives the full death benefit when the policyholder dies.

As the policy owner, you can enjoy several benefits of a life settlement. Some of them include the following:

It provides an immediate source of cash that you can use for anything, from paying off debt to financing a business venture and covering major expenses that may arise unexpectedly. You no longer have to keep track of the premiums that must be paid to the life insurance company. You no longer have to worry about saving to pay the premiums if you can no longer afford the policy and you don't want it to expire. You can use the capital to create a retirement fund or supplement your retirement income by purchasing an annuity. You can set aside money to pay for long-term care needs that may arise.

A life settlement is also an attractive option for those who have a policy with a high cash value but don't need the death benefit. For example, you may have taken out a life insurance policy to secure the financial future of your spouse or children, who no longer depend on you. With them becoming financially independent, the policy may no longer be necessary.

The same goes for older people who may have taken out a policy when they were in good health, but now, with their deteriorating health, may be struggling to pay the premiums. A life settlement can help them eliminate this burden and improve their quality of health care and life.

Related: Why Life Insurance Should Be Part of Your Wealth Building Plan

Eligibility requirements for a life settlement

Generally, you must be 65 or older and your policy must have a minimum face value of $100,000 to qualify for a life settlement. That's because investors wouldn't want to pay premiums on a policy for you if you could continue...