Life insurance may become a burden for policyholders who are facing money constraints as they have to pay a premium every month. 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 sometimes are left scrambling for cash to meet their expenses and lifestyle demands. This is when you can consider cashing out your life insurance to come out of the financial crisis. While cashing in the 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 possible ways in which 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 things. However, once you determine all your needs, there are basically three major ways to access the value of your life insurance policy while you’re still alive.
Life insurances come in two forms – term life insurance and permanent life insurance. Term life insurance cash out value is less when compared with permanent life insurance. This insurance pays out the benefits once the policyholder passes away while the policy is still in effect. On the other hand, 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:
1. Loans – Most of the life insurance companies allow policyholders to take a loan from the accumulated cash value of their policy for any reason. These loans don’t have any repayment schedule like the 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.
2. 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 needing to be worried about the interest charges. However, you need to remember that withdrawal might lead to change in the policy premiums that you pay and even can affect the life insurance benefits.
3. Surrender – Surrendering a policy is synonymous to 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 the term life insurance policies, since they don’t have any cash value. So, if you ever think “can I cash in my term life insurance policy?” the answer is, no.
Living benefits are another way to get the cash out of your life insurance company, while you’re still alive. Life insurance with living benefits allows you to cash in a portion of your insurance in advance, which is in most cases usually up to 50%. However, to access these benefits, there are certain criteria. You can only access these benefits in the circumstances that are listed below:
Chronic illnesses, as you might know, is something that stays with you for a long time. Most of the people suffering from chronic illnesses needed assistance for at least two out of all the activities that are required daily, like bathing, eating, or other things. 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 the living benefits.
Healthcare today is a very costly affair. This is worse when you need to have it for a long time. People receiving long-term care need to shell out a considerable amount of money to receive the services. This is when you can cash in the life insurance. Also, there are chances of you getting additional benefits as well if you cash in life insurance for long-term care benefits.
The people who are certified as terminally ill by physicians with a life expectancy of fewer than 12 months can apply for the living benefits. They are eligible to cash in their life insurance.
While all these benefits may come standard in most of the life insurance policies, you need to make sure that yours are buying best life insurance with living benefits. Some policies might contain various terms and conditions that might restrict you from accessing them.
Life settlements are a great way to cash in your life insurance policy, especially if you’re 65 and above. A life settlement is a process of selling your existing life insurance policy to a third-party investor in return for cash. If in case, you don’t need the death benefits linked to your insurance anymore, selling the policy is the best way to exchange it for cash.
Even though the amount you receive through life settlement is less than the actual death benefit, it gives 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. It’s highly recommended that you take the advice of a professional life settlement provider to do the job for you. If you’re looking for a good life settlement provider, no need to look further. We at Harbor Life Settlements provide you great 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 as mentioned above help you cash in your life insurance policy when you need them. So, what are you waiting for? If you need cash urgently, consider any of the three options and cash in your term or permanent life insurance policy.