Have you recently received a letter from your life insurance provider sharing a limited-time offer to receive an “enhanced cash surrender” payout? If so, you’re not alone.
Life insurance companies like Transamerica, Lincoln, John Hancock, and Sun Life have reportedly extended enhanced cash surrender value offers to policyowners that are greater than the cash surrender value. But before you jump at the chance to surrender your policy for an enhanced cash payout, take a moment to learn more about how enhanced cash surrender value works —and how a life settlement may be able to provide you with an even higher payout.
What Is Enhanced Cash Surrender Value?
Enhanced cash surrender value is an offer from a life insurance company to “buy back” a policy it issued for more than the accrued cash surrender value. Enhanced cash surrender offers are typically limited-time deals that end within a few months to compel policyowners to surrender their policies.
While this cash payout may seem like a good deal —and convenient option — for policyowners who no longer want or need coverage, enhanced cash surrender value may not provide the highest payout for the policy. That’s because selling the policy to a licensed life settlement provider may yield a much higher return.
A life settlement is the sale of a life insurance policy to a third-party buyer, such as a licensed life settlement provider. In a life settlement, the life settlement provider buys your life insurance policy, assumes responsibilities for the premium payments, and collects the death benefit when the insured passes away.
How Much Can You Receive From An Enhanced Cash Surrender Offer?
While the enhanced cash surrender value of your policy is likely higher than your cash surrender value, it is most likely much llower than you could get in a life settlement. The purpose of a limited-time enhanced cash surrender offer is to entice policyowners to surrender their policy at a slightly higher payout than their cash surrender value, while enabling the insurance company to avoid paying the full death benefit. Before accepting an enhanced cash surrender offer from your life insurance company, it’s wise to have your policy evaluated for a life settlement to see how much your life insurance policy is worth to a third-party buyer. The life settlement payout may be significantly greater than collecting the enhanced cash surrender value.
How Can You Ensure You’re Receiving a Fair Offer?
Getting an appraisal from a third-party buyer can help you determine whether the enhanced cash surrender offer from your life insurance company is fair, or if your policy may be worth more in a life settlement transaction. If you’ve received an enhanced cash surrender value offer from your life insurance company, reach out to our experts at Coventry Direct to get a policy appraisal. In many cases, you will find that a life settlement provides more than the carrier presents through their enhanced cash surrender value offers.
The Specific Use of Enhanced Cash Surrender Value
Enhanced Cash Surrender Value (ECSV) programs, offered by life insurance carriers, provide policyowners with more than the cash surrender value to surrender their policy. However, opting for ECSV may not be the best financial decision, as policyowners could potentially receive higher payouts through a life settlement. Despite offering improved returns compared to traditional surrender values, ECSV still falls short when compared to the potential benefits of pursuing a life settlement.
Surrender Charges and Impact on Cash Surrender Value
Surrender charges are fees imposed by insurance companies when a policy is surrendered prematurely, particularly impacting the cash surrender value. This value, representing the amount received upon surrender, is often lower than premiums paid, especially in the early policy years due to higher surrender charges. It’s crucial for policyowners to carefully assess the financial implications of surrendering, considering alternative options to avoid potential losses.
Financial Outcomes of Selling Policies
Policyowners face the choice of selling their life insurance policies in the life settlement market or surrendering them to insurance companies. On average, life settlements yield about seven times more than surrendering policies, highlighting the significant financial advantage of opting for a life settlement. This underscores the importance for policyowners to carefully weigh their options to maximize their financial returns.
The Benefit of Selling To A Third-Party vs. Taking An Enhanced Cash Surrender Value Offer
Enhanced cash surrender value offers are designed to compel policyowners to give up their policies within a certain window of time. While an enhanced cash surrender offer can certainly provide a convenient way to get rid of a policy you no longer want or need, it may not pay out the full value of your policy’s worth. In fact, there are several reasons why selling your life insurance policy to a third-party buyer may be better than taking the enhanced cash surrender value offer, including:
- You typically receive a higher payout in a life settlement. Since a life settlement offers a payout that’s on average four times more than cash surrender value, selling your policy could result in significantly more money than the offered enhanced cash surrender value.
- You may be able to retain some of the death benefit. When you take the enhanced cash surrender value, you will no longer have coverage and your beneficiaries will not receive a cash payout upon your death. If you still want some life insurance coverage — but need the cash windfall — a life settlement may allow you to retain some of the death benefit for your beneficiaries and still receive a one-time cash payout.
- A life settlement isn’t a limited-time offer. Unlike an enhanced cash surrender value offer, a life settlement offer is not designed to pressure you into selling your policy.
When faced with the decision to surrender your life insurance policy for an enhanced cash value payout, it’s important to consider all your options carefully. While the enhanced cash surrender value may seem enticing (and convenient), a life settlement can provide you with an even higher payout and a much more favorable outcome. By selling your policy to a licensed life settlement provider, like Coventry, you can maximize the value of your policy. For more information about selling your life insurance policy, contact the experts at Coventry Direct.
