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Video Tips: Tax Implications of Selling a Life Insurance Policy

In times past, an individual who no longer needed a life insurance policy had few options. In general, he could surrender the policy to the issuing insurance company for its cash surrender value, or he could stop paying the premiums and let the policy lapse. For a term insurance or other policy without a cash surrender value, the only choice was to let the policy lapse. Now, for some individuals, there is a secondary insurance market in which they may be able to sell a policy for more than its cash surrender value or even sell a policy without cash surrender value, such as a term policy. These transactions are called life settlements. 

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