"For sale by owner": How does a life insurance policy feel?!

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If you have nagging thoughts about whether you should keep your whole life insurance policy every time you open your premium bill, you do have options. If you no longer want or need the insurance, you could:

Terminate the policy and take the cash surrender value.
Ask your life insurance company to use your cash value to calculate a smaller face value for a “paid up” policy.
Sell your policy in a transaction known as a life settlement if you meet certain criteria, including declining health. (See more on life settlements: To sell or not to sell?)

If you decide to sell your policy in a life settlement, you’ll enter an evaluation process and receive an offer. Investment groups often bundle these policies together as securities. But often overlooked in the process is how the life insurance policy feels . . . until now.

Aug. 2, 2009

Dear Life insurance policy owner,

Yoohoo! I just wanted to drop a short line to let you know that I’m still here . . .in the drawer . . . at the bottom. For over 20 years now. I just wanted to make sure that you didn’t forget about me.

With undying love,
Your Life Insurance Policy

Aug. 5, 2009

Dear Life Insurance Policy Owner,

Huh, you’re thinking about selling me off? And I had to hear it from this investor guy?

I guess I understand — the kids are all grown up and you don’t think you need my money anymore. Not to mention that you don’t want to pay my premiums. Still, wouldn’t you rather be safe than sorry and keep me around anyway?

Concerned,
Your Life Insurance Policy

Aug. 12, 2009

Dear Life Insurance Policy Owner,

I feel so distant from you now. I’ve overheard them talking about you around the office here. They’re trying to guess exactly how long you’re going to live. The sooner you kick the bucket, the better the payoff is going to be for them. Did you get the medical release forms? I was in a pile with them yesterday.

And I think they’re even going to hire someone to estimate your life expectancy. They keep looking at my death benefit amount, the rating of the insurance company that issued me, and the premiums necessary to keep me active. I feel so . . . exposed.

Alarmed,
Your Life Insurance Policy

Oct. 20, 2009

Dear Life Insurance Policy Owner,

You’ve gone and done it! Sold off for $455,000? Pleeease, I’m worth $1.5 million. Talk about a blow to my self-esteem.

At least you were smart about the fees you paid. I thought that you were going to choose to pay a percentage of my $1.5 million face value, but it makes a lot more sense for you to pay a percentage of my cash value, which is only $72,000.

Still, if you want to change your mind, you do have 15 days to cancel this deal and take me back. Take me back!

Betrayed,
Your Life Insurance Policy

Oct. 25, 2009

Dear Former Life Insurance Policy Owner,

You know, I’ve been thinking things over and I’m not mad anymore. I understand that you were banking on the fact that you would live for a long time. My new owner has been paying my insurance premiums — and waiting for you to pass away.

But my new drawer is nice enough, and I have other policies to keep me company. (Although the policies from Boston talk funny.) I’m gratified that you received some money to help you in your retirement years. I guess I can understand why you decided to sell me. In fact, the amount of money people usually get for a life settlement transaction is about two to five times the cash value of the policy, so you did pretty good by me.

I hope you thought ahead, though, because that income is going to be taxable!

Take care,
Your Former Life Insurance Policy