Thinking About Canceling Your Life Insurance? It May Be Another Option

Study Time: 6 minutes

Sponsored content

Life insurance is usually set up for a specific purpose, such as protecting a loan or family members, and is often revised when life changes.

But what if your circumstances change? Maybe the mortgage is paid off, the kids are grown, or the monthly payments are out of control.

The We Buy Life Policy aims to give consumers another option to consider before letting the policy lapse or canceling cover altogether..

The company says it is creating a new secondary market for term life assurance policies in the UK, allowing some policyholders to sell a policy they don’t want for a lump sum instead of letting it lapse with no return.

What does a We Buy Life Policy do?

We Buy Life Policy buys the right life insurance for people who may no longer want, need or can no longer afford it.

In plain English, this means that instead of simply canceling the policy, other policyholders can sell it for a lump sum.

If the sale goes ahead, the buyer takes over the policy and becomes entitled to any future payments. The original policyholder receives the agreed amount of money, but he and his family will no longer be able to receive the proceeds from the policy later.

Why is this different?

We Buy Life Policy claims to be the first company of its kind in the UK to offer a direct-to-consumer channel for people to sell specific term-based life insurance policies.

The idea is not new to the world. In America, the housing market is very established. There, some people have been able to sell life insurance policies they no longer need, rather than surrender or let them lapse.

However, the UK market is different, and this is where students need to be careful. The FCA has previously raised its concerns life policy investmentespecially where retail investors are sold complex residential investment products.

That’s not quite the same as a consumer selling their policy for cash, but it shows why this area requires careful wording, proper understanding and no hasty decisions.

Why would someone sell life insurance?

There are many reasons why someone might revisit a policy they took years ago.

For example, the policy may have been taken out when the household has a large mortgage, minor children or a dependent. Years later, the loan may be less or paid off, the children may be independent, or the person may feel that their priorities have changed.

Others may be reviewing their monthly outgoings and wondering if they can afford the premiums on insurance they no longer feel they need.

Can Junk Policy Have Financial Value?

Possibly, yes – but only in the right circumstances.

For some people, selling life insurance they don’t want can free up money for something they would otherwise have to cancel. That money can help with debt, home repairs, retirement expenses, debt reduction or just creating a breathing space.

But it shouldn’t be seen as free money. A sum of money is received to issue a future payment. That’s a trade-off.

It may be more suitable for someone who has already decided that they no longer want or need the policy, and may let it lapse.

Why not just cancel the policy?

With most term insurance policies, if you stop paying premiums, the policy expires and usually there is no cash back.

We Buy Life Policy says its service is designed for policies that would otherwise expire without a surrender value. In those cases, selling may give the policyholder another option to consider.

Who will not be eligible?

This won’t be right for everyone.

It may not be suitable if your family is still dependent on the cover, if your partner will struggle financially without payment, or if the policy is still needed to pay the mortgage, debts or other obligations.

It may also not be appropriate if you are unsure, feel pressured, or don’t fully understand what to give up.

Does the We Buy Life Policy state how the process works?

According to We Buy Life Policy, customers can submit their policy details for review. The company then reviews whether the policy is suitable and, if so, can make an offer.

Not all policies will qualify, and not everyone will receive an offer.

Factors may include the type of policy, policy terms, premiums, size of cover and eligibility criteria prevailing at that time.

How is this different from the American market?

In the US, residential properties are already a very large and stable market. Policyholders may sell policies they no longer need, and those policies may be held by investors or institutions.

That doesn’t mean the UK market will work the same way. UK regulation, consumer expectations and the types of policies available are different.

For MoneyMagpie readers, the bottom line is this: the fact that a market is established elsewhere does not automatically mean that it is good for everyone here.

It just means that the concept of selling unwanted life insurance is not universally heard, and We Buy Life Policy now brings a version of that concept to UK consumers.

Questions to ask before doing anything

Before selling any policy, it is worth taking a breath and asking reasonable questions.

MoneyMagpie Essentials

We Buy Life Policy is an interesting new entrant to the UK financial sector because it shines a light on something that many people may not have considered: unwanted life insurance may have value for someone else.

For the right person, especially someone who was already planning to cancel the policy, this can be a useful option to consider.

But it is not a hasty decision. Selling a policy means giving up future payments, and that can have serious implications for loved ones.

So yes, this could be a way to make a few bob from a policy you no longer need. But it should be looked at carefully, with clear eyes, realistic expectations and a proper understanding of trade-offs.

Disclosure

This is sponsored content in partnership with webuylifepolicy.com. MoneyMagpie reports on the service for informational purposes only. This article does not constitute financial advice, investment advice, insurance advice or a personal recommendation to sell, cancel or amend any financial product.

Eligibility, coverage and results will vary depending on individual circumstances and policy terms. If you sell a life insurance policy, you, your family and/or your estate will no longer be able to receive future payments from that policy. Students should do their own research and consider seeking independent professional advice before making financial decisions.