How Can I Use My Life Insurance?
If you have a permanent life insurance policy, you can potentially tap into the cash portion of your account while you’re alive. However, term life insurance policies do not have a cash element for policyholders to access. So, if you’re planning on using your life insurance as a backup cash resource, you’ll want to avoid term policies.
|Type of Life Insurance||Can You Access Cash While Alive?|
|Whole Life Insurance||Yes|
|Term Life Insurance||No|
It’s important to note that whole life insurance policies are typically more expensive than term plans and you won’t have immediate access to cash once the policy goes live. You’ll need an adequate amount of cash in the account before you can use it, and it takes time to build that up.
If you have a policy that has a cash element to it and you have built up enough value in the policy over time, you could surrender it and withdraw the entire existing cash value. Alternatively, you may be able to take out a loan on the existing cash amount. However, the amount you ultimately owe on the policy’s outstanding principal (and interest) will be taken from the death benefit before your beneficiaries receive it.
It’s a popular myth that you can’t use your life insurance while alive. Not only can you potentially use it, but it may also be a better vehicle than other forms of credit. Just understand that the benefits afforded by a life insurance policy will vary based on the type of policy and which options you chose when buying your coverage.
If you’re interested in the benefits this option can afford, start by getting a free price quote.