The cost basis of a life insurance policy refers to the cumulative amount of premiums paid into the life insurance policy by the policyholder. It represents the total investment made by the policyholder over the policy's life. When a life settlement transaction occurs, the policyholder sells the life insurance policy to a third party. Then the cost basis is subtracted from the transaction proceeds to determine the taxable portion of the income the policy seller receives.

It is important to note that the cost basis is a critical factor in determining the tax implications of a life settlement transaction. If the proceeds from the policy sale exceed the cost basis, the difference is considered taxable income and may be subject to capital gains tax. However, there may be no taxable income or a potential tax loss if the profits are less than the cost basis.

The cost basis of a life insurance policy can be affected by various factors, such as the amount and frequency of premiums paid, any loans or withdrawals taken against the policy, and any dividends or interest credited to the policy. Policyholders need to keep track of their policy's cost basis and consult with a qualified tax professional to understand the tax implications of a life settlement transaction or any other policy-related transaction.

In addition to the cost basis, other considerations in determining the tax consequences of a life insurance policy include the policyholder's age, health status, and the policy's cash surrender value. However, to make informed decisions and ensure compliance with tax laws, it is crucial to thoroughly understand the tax implications of any life insurance policy transaction.

Selling Your Life Insurance Policy Is An Important Decision

How do you know if you will receive the best offer when you sell your life insurance policy? The only way to know for sure is to apply to every licensed buyer in your state, which could be 10-35 different companies. And those direct buyers do not have your best interests in mind, they represent their investors. At Welcome Funds, we've leveled the playing field for policy owners. We negotiate the best offer for you by conducting an auction with these buyers. When buyers complete, policy owners win! One application, multiple buyers, it's what we call...Life Settlements. Simplified.

Welcome Funds Represents You!

Founded in 2000, Welcome Funds is a nationally licensed life settlement broker that represents policy owners who want to sell their life insurance policy in the secondary market. Our institutional life insurance buyers compete in an auction bidding process to ensure that we secure the highest offer from the life settlement market. We've negotiated over 35,000 life settlement offers and provided more than $1 Billion in sales proceeds to our clients. Please review our website to learn more about how we can provide professional representation and expert advice on selling your life insurance policy.

  • It's Absolutely FREE to Find Out if You or Your Loved One Is Eligible to Sell A Life Insurance Policy
  • There's No Obligation at Any Time
  • Our Life Settlement Qualification Process is Completely Confidential
  • We Provide a FREE Personal Consultation and Appraisal

Complete our free Life Settlement Qualifier or call us toll-free at 877.227.4484 to speak with a Client Care Advocate.

Sell Your Life Insurance policy