(ContentDesk) November 14, 2005 -- Dont cancel your life insurance policy without reading this first. Depending on your situation, you may be losing tens of thousands of dollars if you do. If you have a life insurance policy that you no longer can afford or need, consider selling the policy. Read on to find out how.Lots of investors have life insurance. Most people think the only way to collect on a life insurance policy is to die first.

But theres another way to benefit financially from a policy while youre still alive and kicking. Its called a life settlement. There are a lot of companies that buy life insurance policies. These companies arent buying policies to do you a favor; they buy them as an investment. When they buy a policy, they pay you up front and take over payment of the premiums.

The amount they pay will vary on several factors, but usually averages to about 15% of your policys face value. You benefit by getting more money out of your policy than if you cancelled it or surrendered it. Not every life insurance policy can be sold. In general, the policy holder usually has to be age 55 or older with a life expectancy between 2 and 12 years. The insurance policy has to be transferable.

It must be a universal life, variable universal life, second-to-die or term life policy. Face amounts need to be at least $100,000. Several changes in your life could cause you to consider a life settlement. Estate tax law revisions might mean your heirs no longer face a hefty tax bill at your death. Perhaps your universal life premiums have become too expensive for you, or maybe you no longer have to worry about replacing your income.

In these situations, you have several options. You can view your policy as an investment and keep it. You may be able to lower your amount of coverage. You can let it lapse or surrender it for its cash surrender value. But sometimes a life settlement is a better solution.

For instance, because of estate tax law changes, a lady in her late eighties no longer needed her universal life insurance policy. She didnt want to keep paying the premiums on her $600,000 policy. Instead of canceling the policy for the $518 cash surrender value, she sold it instead for $80,000. A recently-retired gentleman had a universal life policy for $1,000,000. He became very ill and was having trouble paying his medical bills.

He passed on the $2,128 cash surrender value and collected just over $100,000 through a life settlement instead. This allowed him to pay for the medical care he desperately needed. Keep in mind, though, that these people received far less than if they held the policy until death.For those considering a life settlement, there are a few words of caution. Be aware that the commissions on life settlements can be as high as 33%. These commissions are negotiated between the adviser and the purchasing company, but are not always disclosed to the client.

If your state doesnt require such notification, make sure your adviser clearly states their cut. Have your adviser show you offers from several companies. You will want to know the gross offer, the commission and the net amount you will receive. An adviser may recommend a company based on which pays them more, not you. Beware of advisers who approach you about life settlements.

In this case, its far better to be the pursuer than the pursued.There is a big difference between selling your policy and buying someone elses policy as an investment. I dont believe any small investor should buy someone elses life insurance policy as an investment. These were sold as viaticals over the last several years and many took the bait to their regret. Dont buy a viatical!Life settlements arent for everyone. You need to make sure your life insurance needs are properly met and youve carefully considered all the pros and cons before making your decision.

But in some circumstances, a life settlement can be a wonderful way to dip into the pot of gold sitting in your life insurance policy.Have a financial question? Send me an email and Ill personally respond, free of charge. Go to http://www.guardingyourwealth.com and click on Ask Jeff. In addition to being a nationally syndicated columnist and Certified Financial Planning Practitioner, Mr. Voudrie provides personal, private money management services to clients nationwide.Looking for an energetic expert who is passionate about financial and wealth management? Mr. Voudrie is an excellent speaker who will excite and inspire your audience.

Mr. Voudrie is available for a limited number of speaking engagements, television appearances and radio talk shows. Related Articles can be found at www.guardingyourwealth.com under the Guarding Your Wealth Article Archive..