Selling a Term Insurance Policy Could Cost You Dearly

In today's financial climate it is very tempting to take a short term view rather than looking towards the future. With the Australian Dollar reaching parity with the US dollar this week (before falling back a few cents) it is very hard to know what is the right decision to make if you are thinking of selling your term insurance policy to cover a short term debt problem.

When you bought your structured insurance policy to mature on a certain date, you were no doubt thinking well ahead into your future. For those of us who are close to retirement age, many of us are feeling the financial crunch because too many of us are under-employed if not unemployed. Having another asset like an insurance policy in addition to owning your own home is comforting.

But as the months pass and house prices are falling, it is becoming more and more tempting to sell off your structured insurance settlement to cover rising costs of living. House prices can fall but the cost of living seems to be rising at an exponential rate. Keeping up with living is costing us all dearly these days.

If you are relating to this scenario, then go forward for the next five years. Personally, I can't see much changing except the cost of living being even more expensive. The trick here is in knowing how much longer one will live for, so one can plan their finances a bit better! Unfortunately, this is the great unknown question for all of us. Back to the reality of "to sell, or not to sell...that is the question"

I believe the best way to make a decision is based on a couple of known factors. How far away is the maturity date of your current policy? How much is the full value of your insurance policy worth when it reaches maturity? Can you get a loan against it because it is an asset and if you did get a loan, can you afford to pay it off or can it be repaid on the policy maturity date?

If you are seriously considering selling your structured settlement then the first thing you will need are all the facts. Without these facts and figures, selling your term insurance policy at this time could cost you dearly. Some policies have clauses inserted in the small print of some pretty horrific penalties for anyone who sells prior to maturity. A lot will depend on how old the policy is too. If it has been only recently taken out then you probably won't lose too much. If you are about mid-way through the life span of the policy, then I suggest you do some very serious talking with your insurance company before making any final decision otherwise it may cost you dearly.