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This happened in Canada.

A person has a life insurance policy that matures in 2024 (in 9 years) and he has been paying monthly premium since 1996 (for 19 years).

He lost his job and is not able to pay the monthly premium anymore.

The insurance company says that this policy carries no cash value, but upon maturity in 2024, it would have a guaranteed value (Let say $50,000) based on the monthly premium paid compounded by 4.75% annually. So theoretically, this policy has a nominal value of $25,000 today based on 4.75% but is not cashable.

Is there a way to sell this policy to a third party institution?

The corporate bond yield with 8 year duration is about 2.5%. Couldn’t a third party just buy the policy at $25,000, pay premium for the next 9 years (and short sell bond futures) and earn a profit?

It is hard to believe that if this policy was sold to another person for $0 today, and that person continues to pay the premium, that person can receive $50,000 in 2024 (earning 34% annually over 9 years risk free).

If selling this policy is not possible, is there a way to get a loan to pay the monthly premium for the next 9 years?

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    This sounds like whole life, not term life. Are you sure this is a term life policy? – ChrisInEdmonton Mar 27 '15 at 18:50
  • You might be correct that death coverage continues after 2024, but only if it is not surrendered (i.e. if the $50,000 was not cashed). – HD_69830 Mar 27 '15 at 18:52
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    If it's actually whole life (which it sounds like), see investopedia.com/articles/pf/08/life-insurance-cash-in.asp That won't apply to term life, though. – ChrisInEdmonton Mar 27 '15 at 18:57
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    That page only applies when the policy has official "Cash Value" today or if the insured is over 65 years old. – HD_69830 Mar 27 '15 at 18:59
  • It also sounds like a hypothetical without enough info to answer properly. – keshlam Mar 27 '15 at 21:53
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To answer your first question, Is it possible to sell the insurance policy to another institution, the answer is NO because insurance contract are not transfearable investments.

To have a guaranteed value of 50,000 in 2025 means that the face value, the amout of money upon death, is going to be 50,000$ in 2025, NOT than you can have 50,000$ cash in 2025. It is a question of words.

You need to check again with the insurance company. Ask for a representative to call you back. He will probably not know because this contract is obviously an old one, by what you say. Ask him to send an internal email to his head office asking for the details. This is the only way for you to have the correct answer.

The answer to your last question "Is there a way to get a loan to pay the monthly premium for the next 9 years" is YES, you can do something. Make an agreement with someone of your family (vested interest) who can:

  • pay the monthly premium,
  • change the ownership of the policy to his name,
  • change the beneficiciary to himself and then
  • give you some money monthly to help you financially.

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