Even though we don’t like to think about it, the fact of the matter is that we all eventually pass away. With this knowledge, the best we can do is try to make sure our beneficiaries are taken care of when we depart. No matter how young you are or what your life expectancy is, it’s critical for you to have a life insurance policy to take care of your spouse and children in case of your untimely passing.
Oftentimes, when people purchase a life insurance policy, the only terms of which they think of a payout are in case of death. Even though life insurance is a death benefit, you can do a lot with the cash value of your life insurance in the here and now. Continue reading to learn some of the many ways you can cash in on your life insurance policy.
People facing a terminal illness often have medical bills that could rival many mortgages. Even having a health insurance policy doesn’t mean your insurance company will cover every treatment the doctor prescribes. Furthermore, end-of-life care can be as expensive as many medical procedures, depending on the level of care needed.
If you have a terminal illness and your life expectancy is less than two years, you can cash in on your insurance policy with what’s called a viatical settlement. Because viatical settlements are last-resort financial options for people in end-of-life care, their cash value is based on the patient’s life expectancy. The shorter the life expectancy of the policyholder, the larger the payout is for the life insurance policy. Because of the regulations regarding viatical settlements, it’s a good idea to check your eligibility before trying to get one.
Viatical settlements aren’t the only way to sell your life insurance policy, but what separates them from life settlements is that you don’t have to pay taxes on the payout for a viatical settlement. In the next section, we’ll discuss life settlements which are the best option for anyone who doesn’t have a terminal illness looking to sell their insurance policy.
The difference between a life settlement and a viatical settlement is that anyone with a life insurance policy can get a life settlement, however, finding the right buyer is the tricky part. If you have term life insurance, the longer you have left on your term, the easier it will be to sell your life insurance policy. The reason for this is that having more time left on the policy increases the possibility that a potential buyer will be able to cash in on the insurance policy.
When selling a life insurance policy, it’s best to grow through a broker who can find potential buyers. Life insurance is a valuable asset, and you need to make sure you get the best deal possible before selling your death benefit. An experienced broker can point you to the life settlement companies that are most likely to give you a fair deal and also give you a good idea of your life insurance policy’s cash value.
Borrowing Against Your Insurance Policy
Even if you don’t want something as final as a life settlement, there are other ways to cash in on your policy’s value that don’t include selling your insurance policy. Many policy owners borrow against their life insurance policies in lieu of getting a life settlement.
One of the great things about borrowing against your life insurance policy is that there is no credit check. However, you have to pay the loan back with interest, and if you fail to repay the loan before you die, the amount you owe in principal and interest will be taken from your death benefit.
As you can see, your life insurance policy can be a valuable financial asset. Whether you choose to sell your insurance policy or borrow against it, the most important thing is to make sure you’re truly at peace with your decision.