Living off your life insurance: Having your cake AND eating it!

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A while back, my wife and I passed one of the major landmarks of adulthood: we took out life insurance policies.

While we had both had life insurance before, it was provided by our employers; this, on the other hand, was something that we paid for all by ourselves. While we didn't contract for spousal-murder/film noir levels of insurance, the money should keep our daughter and the surviving spouse covered for a while if the worst should happen. If, by lucky happenstance, we make it to the end of term, we have the option of cashing out the policies and taking a long, long trip.

Recently, I learned about another possibility: if we should manage to live into our sixties, we have the option of selling our life insurance policies. Some companies, including Goldman Sachs and JPMorgan, purchase life insurance polices, often for as much as 20-30% of the death benefit. As this far outstrips the premium repayment that my wife and I were thinking about, it is a pretty attractive option. Some sites, including Policysettlement, offer estimates on the value of extant life insurance policies.Of course, there are downsides to this plan. First off, if you have survivors, then they won't receive any of the proceeds from these policies. Of course, you could always get other policies for family members. Alternately, if you live in one of those Agatha Christie/Alfred Hitchcock-style families that seems inclined to murder you for your insurance, you might want to make it very clear to them that there is absolutely no benefit in bumping you off.

Another odd part is the fact that, the sooner you die, the greater the profits that your life insurance purchaser gets. Now, even in my most paranoid moments, I find it hard to believe that JPMorgan or Goldman Sachs is likely to hire Ninja assassins to rub me out. On the other hand, if my health insurance provider offers me an insurance-buying deal, I'm running in the opposite direction!

Bruce Watson is a freelance writer, blogger, and all-around cheapskate. He's seen way too many noir films.

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