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Question for the Money Doctors

Question submitted on Aug 27, 2013.

Question

I have $260,000 in life insurance that my former employer pays premiums on since yr 2000 due to long term disability provision I incurred. Can I obtain a broker to purchase this insurance for my person use and benefit before I die? I'm 62 with multiple disabilities.

Answer

Hi, thank you for the question. Typically that answer is yes, you may be able to sell your policy and use the proceeds however you would like. This is assuming that you own the policy. If your former employers owns the policy, then you can't make any changes to it. The value that a broker will put on your policy varies widely based on many factors the biggest would most likely be the type of policy. If the policy is a term policy that expires in a few years, then it probably has no value. If, however, it is a whole life policy, then it would have some value. A broker would discount the face value (death benefit) based on factors such as your life expectancy, profit margin and others. Another big question would be, who continues paying the premium? I don''t know if your employer would continue to pay the premium if you sell the policy.

Please note, life insurance companies typically frown on this practice so if you ask the carrier, it is likely to tell you that you can't do it. Also, some policies have built in "living benefits" such as a chronic illness rider. These riders allow you to access a portion of the death benefit early. They are fairly new to most policies though, so it might not be available on your policy. I hope this helps.


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