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The Process Of Selling A Life Insurance Policy

The Contract Stage

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Upon verbal acceptance of an offer, the purchaser will send you a contract for review. Purchase contracts are generally straightforward, but do vary from company to company. As you review the contract, be sure that:

  • The purchase price is clearly indicated -- as a dollar amount rather than as a percentage of the death benefit.
  • Your relationship with the purchaser as a result of the sale is clearly indicated. For example:
    • How often will the purchaser contact you after a sale has taken place?
    • Does the purchaser have a right to contact your beneficiary?
    • Does the contract state that you have other obligations as a result of the sale?
  • An escrow agreement with a national bank or other reputable independent entity should be included as part of the contract. The contract should provide that the papers you sign transferring the ownership of your policy are held in escrow until funds are transferred equal to the price you are to receive. This mechanism assures that you will receive the proceeds in return for a sale of your policy. The escrow agreement should provide what happens in the event that any party does not, or is not able to, satisfy their contractual obligations.
  • Any contingencies are clearly indicated. An example of a contingency might be that the purchasing company requires receipt of a copy of the original policy before it pays you any money (assuming that you only submitted a copy originally).

Note any date by which you must return the contract before the offer expires. This should be a reasonable amount of time (usually between 15 and 30 days.)

Be wary of any intense pressure from a purchaser or broker.

It is always a good idea to have every contract reviewed by an attorney. At least, review the documents with an attorney if anything seems peculiar to you and/or you are unable to receive a suitable explanation for any questions you may have.

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