Selling your life insurance policy

Your April 9 column about surrendering a life insurance policy didn't mention an alternative: selling it to a life settlement company. Isn't that a good option?

This may be an option if you're over 65, own a large policy you no longer need, and your health has deteriorated since you bought it. Whether you find it a good alternative is another matter.

In a life settlement, you sell your policy -- along with permanent access to your past and future medical records -- for 10 percent to 20 percent of the policy face amount. The new owner pays the premiums and collects the death benefit when you die. Not to mince words, he wants that to happen as soon as possible. The longer you live, the smaller his return; live too long, and he loses money.

Buyers want big policies -- average face amounts range from $1 million to $5 million -- on people in less-than-perfect health. To get bids for your policy, you must undergo expensive medical exams and life expectancy appraisals. (If a broker offers them "free," rest assured their cost will be subtracted from the bids.)

The life settlement market has a history of predatory sales practices, high fees and undisclosed conflicts of interest. If you explore this option, you can protect yourself by retaining an insurance expert who has no financial stake in a sale to evaluate your policy and the pros and cons of selling it. "Get copies of the medical records and life expectancy appraisals, insist on seeing every gross offer, and negotiate the broker's commission," advises Glenn Daily, a New York City insurance consultant. "You shouldn't have to pay more than 10 percent of the gross purchase price."

The bottom line Don't sell your policy before getting objective advice about whether it makes sense for you.

Websites with more information bit.ly/h8sL3m and bit.ly/g9uIkn