Senin, 09 April 2012

Your Insurance Policy Can Be Traded - Even If It Is in a Restricted Period

During the first 5 years, the surrender value and the true value (fund value) of an insurance policy can differ substantially. This is exactly the reason why the second-hand policy market was established.
The second-hand market enables investors to buy unwanted policies for more than the surrender value offered by the insurance company. Investors will pay more than the surrender value because the policy has greater value if it is kept in force than if it is terminated early.
Everybody needs cash. It might be a great shock to realise although you have a policy, the cash value is restricted and therefore not available to you. To overcome this problem, the policy can be sold to an investor.
When a policy is sold, all rights on the policy are transferred to the new owner. The new owner will pay all future premiums and collects the maturity value when the policy matures. Policy buyers realise they can achieve better returns by investing in pre-owned policies as opposed to completely new ones. Buyers purchase at a discount to the true value, but at a premium to surrender value.
The seller, on the other hand, has the benefit of immediate access to the funds. All restricted policies are tradable and this is the only way to access the restricted value of the policy. Also, the payout to the seller is higher, because trading offer more value than surrendering.
An endowment policy is a savings plan which pays out at the end of the contractual period. Should a policyholder terminate an endowment contract earlier, it is a breach of contract so penalties are involved. Only premiums plus a maximum of 5% will be paid to the policyholder.
Traded, or second-hand policies, is an alternative to the early surrender of an investment or policy. The value that the seller will receive when trading, is often a much higher value than the surrender value offered by insurance companies.
Below follows a broad outline of financial products that are tradable. However, bear in mind that not all policies matching those listed will be tradable.
  • Single-premium investments
  • Smooth Bonus Portfolio policies
  • All Guaranteed Growth and Income plans
  • Voluntary/Optional term annuities
  • All insurance Policies and Investments in a Restricted Period
Retirement annuities, life insurance with the exception of reversionary bonus / conventional (issued prior to 1987), deferred compensation, matured endowments, hospital or medical plan products, funeral plans and term insurance are not tradable.
Trading a policy is exactly the same as buying or selling any other asset. Get the advise of an expert, before making any uninformed decisions.