When Would This Option Be Recommended?
There may be many reasons for someone to sell their life insurance policy, but it ultimately comes down to finances. For example, you may be trying to cut down on monthly expenses, and eliminating the monthly life insurance payment can help. Or, you may have enough in your savings account and retirement funds that you don't need to have the life insurance policy to provide for your family. In this case, called "self-insurance," you may be better served by eliminating the policy and having the cash to invest in other things.
It's important to note that if you do sell your life insurance policy, you may have a harder time obtaining another policy if your needs change. Finally, consider the needs of any loved ones who may be affected by your passing. While it may be tempting to cash out your life insurance with the buy-back option, any dependent children you may have might benefit from a policy that will protect them financially once you’re gone.