Extra Value

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Of course, maintaining your policy until you die is usually the smartest move of all--if you can afford it. "People don't think they're ever going to die, which is why life insurance is such a hard sell in the first place," says John Skar, chief actuary at MassMutual Life. He believes most life settlements are a mistake because sellers get only half the intrinsic value of their policy. After all, investors are only willing to take on the payments because they know your life expectancy--and they plan to come out ahead.

So if you want to leave something behind for your heirs, it may make sense to sell some stocks or real estate--if you must in order to meet current expenses--and keep paying on the life policy. But if you're inclined to let your life insurance run out or surrender it for its cash value, consider a life settlement first. Like finding something of value amid the junk in your attic, you'll be happy you didn't just toss it.