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Buying a life insurance policy means you are securing the future of your family. The best thing about term life insurance is that it comes with maturity benefits. And if the policyholder passes away within the policy tenure, the nominee of the policy will get the death benefit. Either way, the policy gives something to the policyholder and his/her loved ones. However, if you buy a life insurance policy and if the need arises for it, you can also choose to transfer your policy. Yes, you read the totally right! Please read on to know how.
Although many policyholders are not aware of this, transferring your life insurance policy to someone else is very much possible. As you are transferring your life insurance policy, you also transfer title, rights, and interest.
One of the most common reasons for transferring a life insurance policy to some other person is to provide security for a loan. In one such case, the borrower assign allocates the policy to the lender. And in this case, the lender is called the assignee. As the life insurance policy is transferred, the assignee receives all the benefits from the policy.
To know the actual steps of transferring your life insurance policy to someone else, you have to contact your life insurance provider. Every life insurance company has its own set of procedures. Nevertheless, here is a general step-by-step guide mentioned below that will give you an idea about it.
Although it may vary from one insurance company to the other, some of the common documents that are mostly asked by all insurance providers are mentioned herein below:
The reason for transferring insurance policies can be many. Here are some of them mentioned below:
The income tax payout due to the death of the policyholder is exempted from any kind of income tax to be levied on the amount. In case, the policy is surrendered by the policyholder, the cash payout of the policy will incur tax that is payable. In such cases, transferring the policy may allow the policyholder to receive the cash payout without burdening themselves with paying additional income tax.
An income tax policy can be used by the policyholder as collateral for securing a loan from a bank. While the bank may need traditional collateral such as real estate or investments, in lack of these an income tax policy can be used as collateral for a loan. As a term of the bank offering the loan, the income tax policy may be transferred to the name of the bank. In case the policyholder dies before the loan is completely paid off, the insurance payout for the death would be first paid to the bank which can then use it to close the loan by paying off the outstanding loan amount. After that, the remaining amount would be transferred to the nominee of the life insurance policy.
Another reason to transfer a life insurance policy could be that you are in urgent and dire need of money. By transferring the policy to someone else, you give away the rights to make changes to the policy that would usually be reserved for the policy owner.
An insurance policy is a real asset that can help you a lot in securing your and your family’s financial future. You can head to the website of your insurance provider to find more details about how can you make the most of your existing policy by transferring it to someone else.
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