What to Know About Cashing Out Life Insurance
Paying life insurance monthly premiums may become a burden for policyholders who are facing money constraints. This feeling worsens with the realization that life insurance benefits can be availed only after the death of the policyholder. However, one fact that many policyholders don’t know is that they can cash out life insurance before death.
In tough financial times, people are sometimes left scrambling for cash to meet their expenses and lifestyle demands. In situations like these, policyholders can consider cashing out their life insurance as a solution to a financial crisis. While cashing in your life insurance policy is a big decision that can have a significant influence on your financial life, at times it becomes a necessity.
There are several ways that you can cash in your life insurance policy. This depends on several factors, like whether you want to keep the policy or not, the amount of money that you want to access, and various other factors. However, once you determine all your needs, there are three major ways to access the value of your life insurance policy while you’re still alive.
How to Cash in Life Insurance While Still Alive
Term life insurance pays out the benefits once the policyholder passes away while the policy is still in effect. Permanent life insurance is expensive life insurance that has an investment component to it. This means that permanent life insurance allows insurance policies to build cash value over time.
If you have permanent life insurance and want to tap into the policy’s cash value, you can do it in three ways:
- Loans – Most life insurance companies allow policyholders to take a loan from the accumulated cash value of their policy. These loans don’t have any repayment schedule like other loans. However, these loans will accumulate interest charges that directly affect your death benefit. This means you get less death benefit than you’re supposed to.
- Withdrawals – This is a great way to cash in your premium life insurance policy. You can easily withdraw money from the cash value of your policy without worrying about interest charges. However, you need to remember that withdrawal might lead to a change in your policy premiums and can affect your life insurance benefits.
- Surrender – Surrendering a policy is synonymous with canceling it. Once you cancel your policy, it releases all the cash value to the policyholder. However, before surrendering, you need to be sure that you don’t need the coverage of the policy anymore.
Getting cash out of your life insurance by tapping into its cash value is the easiest way to cash in the life insurance policy. However, it doesn’t work for term life insurance policies since this type of life insurance doesn’t have any cash value.
When Can You Apply for Living Benefits?
Living benefits are another way to get the cash out of your life insurance policy, while you’re still alive. Life insurance with living benefits allows you to cash in a portion of your insurance in advance, which is up to 50% in most cases. However, to access these benefits, there are certain criteria. You can only access these benefits if you meet the circumstances listed below:
- Chronic illness benefits
Chronic illnesses, as you might know, stays with you for a long time. Most people suffering from chronic illnesses need assistance for at least two out of all activities that are required daily such as bathing, eating, dressing, or sitting and standing. If you’re suffering from any chronic illness that has drained you financially, you can cash out money from your life insurance as a part of your living benefits.
- Long-term care benefits
Healthcare today is a very costly affair and people receiving long-term care need to pay a considerable amount of money to receive necessary services. This is when you can cash in life insurance. There are chances of you getting additional benefits as well if you cash in life insurance for long-term care benefits.
- Terminal illness benefit
Those who are certified as terminally ill by physicians with a life expectancy of fewer than 12 months can apply for living benefits and are eligible to cash in their life insurance.
While all these benefits may come standard in most life insurance policies, make sure that you are buying life insurance with living benefits. Some policies might contain various terms and conditions that might restrict you from accessing them. You may also be able to sell your policy through a viatical settlement.
What are the Benefits of Life Settlements Over Other Methods to Cash in Life Insurance?
Life settlements are a great way to cash in your life insurance policy especially if you’re 65 and older. A life settlement is a process of selling your existing life insurance policy to a third-party investor in return for cash. If you don’t need the death benefits linked to your insurance, selling the policy is the best way to exchange it for cash.
Get the Best ROI from Life Settlements
Though the amount you receive through a life settlement is less than the actual death benefit, it provides more cash than other options listed above. When you sell your life insurance, you get more benefits than the cash surrender value. Due to this, life settlements are considered to give you the best ROI. Moreover, life settlements are an excellent option for people who no longer need a death benefit for supporting their family.
The best thing about life settlements is that you can find an investor for your life settlement yourself and if that doesn’t work out you can also take the help of life settlement companies and it’s highly recommended that you take the advice of a professional life settlement provider. If you’re looking for a good life settlement provider, no need to look further. We at Harbor Life Settlements provide you free, no obligation life settlement services.
While the real purpose of life insurance is to provide death benefits to support your loved ones, that doesn’t mean that you cannot reap the benefits of your policy while you’re alive. The ways mentioned above help you cash in your life insurance policy when you need to. If you need cash urgently, consider any of the three options. Contact us or call us today at (800) 694-0006 to get in touch with our team and find out how much you can get for your life insurance policy.