Having a life insurance policy has become necessary for everyone, though people view it as another monthly expense bill because of the monthly premiums paid for the policy. It is not surprising that a lot of life insurance owners view their life insurance policy as a money drainer because of the added expense, but this is a misguided notion because having the policy transcends beyond death benefits.
This article highlights three ways to help you as a policyholder to access the value of your life insurance policy when you are still alive.
Sell The Policy
There are some parents or individuals who have decided to sell their insurance policies while they are still alive. Why do you think they chose that? Well, maybe they cannot afford the insurance premiums anymore, or they don’t see the need for it again, having raised their kids or invested in their family to be self-sufficient.
One way to get money from your insurance policy is going the life settlement route. Life settlements have become a thing for people that do not want to hold on to their insurance policy anymore. When you decide to sell the policy, it includes selling the rights to your death benefit.
When you sell your policy, you may decide that the settlement should pay you a tremendous amount or provide an annuity that offers you regular periodic payments, whether monthly or annually. That’s why Cedar Life Settlements recommends that when you decide to sell your insurance policy, it is in your best interest to use a broker so that you can get the best possible offer for the policy’s cash value. Also, a life settlement option gives an elderly person access to funds to cater to a life-threatening illness that cannot be funded using living benefit alternatives.
Access The Policy’s Cash Value Options
As a life insurance policy owner, you are covered under the term life or permanent life option. A term life insurance is inexpensive and allows for the families to get death benefits after your death. Still, everlasting life is more expensive and has investment opportunities to help your policy build up cash value.
The cash value in permanent life insurance ensures that you have access to coverage under the same policy; for instance, you can use the policy as a source of money for any reason. How do you do this? You can make use of your policy’s cash value in three ways; it could be through loans, withdrawals, or surrender.
Depending on the insurance company policy, they mostly allow you to take out a loan from the accumulated cash value for any reason. However, you will have an accrued interest charge on the loan. You can withdraw money from the accumulated cash value of your policy and not have to worry about interest charges, but it will expose you to an increase in premium payments. Also, when you are confident that you do not need an insurance cover, you can surrender or cancel the policy, which releases all the cash value to you.
Living Benefits Alternative
Some policyholders put an addendum in their contract to ensure that they can access their life insurance policy for living benefits. In this case, this allows you to access a certain percentage of your death benefit. At least, the insurance will pay fifty percent of the policy in advance to fulfill specific health or care factors. We usually know them as a sped-up benefit and available in the following forms — terminal illness, chronic illness, and long-term care benefits.
Policyholders diagnosed with a terminal illness such as cancer with a limited life expectancy of not over one year can request that a portion of their policy be paid to them as living benefits to cater to medical bills and other miscellaneous expenses. When you are chronically ill to the extent that you require help for bathing, feeding, or dressing, you can use the living benefit option to access funds to pay your caregivers and medical bills.
Also, in a situation where you require long-term care, either in a medical or older people’s facility, your insurance company could allow you to draw living benefits from your policy to use in paying medical and living expenses.
Insurance companies have various policies that allow you to get money from your policy if you need it for medical emergencies or meet economic needs. Still, you need to be sure if your preferred insurer has these options before buying or committing to paying a premium on the policy.