Assuming your life cover is taken care off, either because you have adequate cover or substantial savings, there are three instances when assigning or selling your life insurance policy makes sense.
It's a burden. Typically, endowment and money-back plans offer returns of just 4-6 per cent a year. If you are finding it difficult to pay premiums, let it go. Go with whoever the insurer or a seller gives you more as surrender value.
Your policy has lapsed. If you don't pay your premium in time, your policy lapses. If you don't revive it within the designated period typically, five years the policy dies. It's all money down the drain, as you don't get any maturity benefits. It's not said aloud, but this is the main bone of contention between LIC and insurance intermediaries. If policies become tradable, you will be able to get some value for lapsed policies, but insurers will have to pay.
The gameplan of these intermediaries is to buy lapsed policies from you at a price that is higher than what insurers would pay, revive them and get the maturity benefits. You are happy, as you get some or more money for something you had written off. The buyer of the policy gets an above-market return. Medical emergency. In case of a medical emergency, you can sell a life insurance policy, but only as a measure of last resort.
Typically, the surrender value is 30-40 per cent of the premiums paid. Illustratively, the effective return on an LIC endowment plan, assuming a return of 6 per cent and a term of 25 years, is just 3.4 per cent a year. If this policy is bought after five years, at a price equal to 50 per cent of the total premium paid, the effective annual return to the buyer will be 5 per cent for a tenure of 20 years. Reduce the tenure to seven years and the return jumps to 16 per cent.
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