How To Use Term Life Insurance While Alive?
Cashing out a life insurance policy is a way to access accumulated cash value from policies before the policyholder’s death. While life insurance typically provides a death benefit upon the policyholder’s passing, some policies also have living benefits to fund retirement. Permanent policies that accumulate cash value like whole, variable, and universal life insurance may allow policyholders to access that money while alive through loans, withdrawals, surrendering it, or selling the policy. However, term life insurance policies cannot be cashed out because they do not accumulate cash value during the limited time they provide coverage. Yet, some term policies have an option to convert them into a form of permanent life insurance.
|Ways to Cash Out Life Insurance Policy||Description|
|Loans||Policyholders can take a loan from the accumulated cash value of their policy that will accumulate interest charges and directly affect the death benefit. However, the loans do not have a repayment schedule.|
|Withdrawals||Policyholders can take money from the cash value of their policy without worrying about interest charges. But, withdrawals may lead to a change in policy premiums and can affect life insurance benefits and reduce the long-term growth potential, leaving a smaller death benefit to beneficiaries.|
|Surrendering Policy||Policyholders can cancel their policy and release all the cash value to them minus fees from the process. But, before surrendering, they need to be sure that they do not require the coverage of the policy anymore. Some policies charge a penalty if cashed out too early, and policyholders may owe income tax if the payout exceeds the premiums paid over the policy’s life.|
|Living Benefits||Policyholders can access up to 50% of their insurance in advance if they meet certain criteria, such as chronic illnesses, long-term care needs, or being certified as terminally ill. But, policyholders should ensure the policy has living benefits and should review their policy documents or talk to their insurer to see if it can be converted.|
|Life Settlement||Policyholders can sell their policy to a third-party investor in return for cash if they do not need the death benefits linked to their insurance. Selling the policy provides more cash than other options but is less than the actual death benefit.|
While the best option depends on how much money needed and whether policyholders want to maintain coverage, small sums can be withdrawn or taken out as a loan from the policy. Living benefits or selling the policy through a life settlement are better options for larger sums.
Contact GetSure.org at (800) 694-0006 to get in touch with a team to discuss options for cashing out a life insurance policy and to find out how much you can get for your life insurance policy.
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