Q: I own a life insurance policy that I no longer need and have received an offer to purchase it. Should I sell?
A: First, you and your family or other beneficiaries must be sure that you no longer need the insurance and that it is no longer economically attractive to keep it. If so, then consider a sale of the policy -- called a "life settlement" -- to investors who will pay the premiums on it and collect the proceeds upon your death.
In some cases, life settlements can yield much more than cash surrender value (which is the value of the policy, not reflecting changes in health after the policy was purchased). This is especially likely if you are over age 70 and health issues have reduced your life expectancy since you bought the policy (which enables the purchaser to collect on the policy sooner). It is best to deal with a reputable life-settlement broker who can obtain bids on the policy from at least 20 potential institutional buyers. And consult an accountant about possible income tax consequences -- for example, part of the proceeds from the sale of the policy may be taxable as ordinary income or capital gains.