How Can Life Insurance Be Used While Still Alive?
If you have a whole life insurance policy, you can access the cash value of your policy while you’re alive. However, term life insurance policies do not have a cash value. To use life insurance as a backup cash resource, avoid term policies and choose permanent life insurance policies such as whole, universal, and variable life insurance policies.
|Type of Policy||Has Cash Value|
|Whole Life Insurance||Yes|
|Term Life Insurance||No|
If you have a policy with a cash element, you can surrender it and withdraw the entire cash value. However, this assumes that you have built up enough cash value in the policy over time so that there’s actually something substantive to take out. If you don’t want to surrender your policy, you may be able to take out a loan on the existing cash amount.
Keep in mind that if you take out a loan, 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. However, taking out a loan on your life insurance policy may be a better option than using a credit card or taking a personal loan, as you won’t have your credit checked in order to get the funds, and you’ll likely have better repayment terms.
It’s a popular myth that you can’t use your life insurance while you’re alive. Not only can you potentially use it as a backup cash resource, but it may also be a better vehicle than other forms of credit. Keep in mind 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 using your life insurance policy while you’re alive, start by getting a free price quote from a reputable life insurance company.