While many people today have either whole or term life insurance policies, few may fully know what this insurance covers and any specific terms that may apply if you sell your life insurance policy. Hence it could be good to know different aspects of your life insurance policy, like the life insurance settlement, a legal practice in several states where a policy holder may be able to sell a policy for cash that is more than its surrender value. People who may want to receive money from a mature life insurance policy could find this option appealing. To find out more about life insurance and taxation, read the article “Learn About the Tax Benefits of Life Insurance.”
However, there could typically be some risks involved. First of all, exercise caution when you are contacted by strangers offering an incentive if you sell your whole or term life insurance policies to them, which they will give to investors for cash. This offer may be illegal in many instances, according to the Ohio Attorney General. For example, term life insurance policies such as STOLI or Stranger Originated Life Insurance allow you to buy a life insurance policy and designate investors as beneficiaries who pay the premiums. However, this may be considered quite morbid since STOLI actually allows investors to make more money the faster that you die. In this scheme, investors may not only gain access to your policy, but potentially also your personal information and medical data. They may be able to sell your information whenever they choose. In fact, these actions alone could stop you from getting access to life insurance in the future and prevent your eligibility for and access to Medicaid. When you sell your policy, the money you receive is also taxable, not protected, and vulnerable to seizure, as a person who engages in a STOLI transaction could possibly face a criminal investigation.
