Most of us think of insurance as just a long period of time of paying premiums. In fact, you can actually get money from your life insurance policy that doesn’t just include cancelling it. When you look into the details you’ll probably find that surrendering your life insurance isn’t the most profitable approach. This is because the cash surrender value you get tends to be relatively low. So, let’s explore other ways to maximize your life insurance policies.
5 Ways to Get Money from your Life Insurance Policy
You might be reassured to know that you can actually get value from your life insurance whilst you’re still alive, regardless of your insurance company. Check out the following 5 ways you can access the cash value and see which one might work for you:
1- Borrow Against your Payout
Loans are a great way for insurers and financial lenders to make money. It’s therefore relatively easy to borrow against your death benefits. The idea is that you use the policy’s cash value as a guarantee, regardless of the types of life insurance out there. As you can expect though, how much and on what terms you can borrow depends on your insurance company.
Normally, you can borrow up to 90% of the cash value of your while life insurance policy. However, that will vary across providers. The good news is that you don’t need to pay it back within a set period of time. Although, the interest could impact your final death benefits. It’s therefore helpful to pay back any extra premium payments as and when you can.
Another option is to withdraw against the cash value portion of your policy. This also comes with the added benefit of being tax-free. Although, as you might expect, you can only withdraw up to the amount you’ve already paid in whole life insurance premiums which will depend on how long you’ve had the policy. One of the great advantages of this approach is that, unlike borrowing, it doesn’t impact your policy or death benefit.
3- Leverage Living Benefits
This is essentially an additional coverage on your basic permanent life insurance policy. The extra benefits are often important for terminal illnesses or sudden long-term special care. Although, bear in mind that they will come at a cost because you’re essentially amending your current policy with extra needs. This can be a huge advantage though. For example, if you discover that you’re terminally ill then you might appreciate receiving a portion of your death benefits from your now universal life insurance. Your decision might be further reinforced if you also find yourself with fewer family members.
4- Surrender Value of Life Insurance
People often choose this approach and, whilst there’s nothing wrong with it, you’ll find that it’s the least lucrative. Basically, you’re cancelling your insurance and getting the current savings associated with any live insurance policies in return. The cash surrender value is usually very small in the early years of your life insurance policy. This is especially true when considered against the premiums you’ve paid. Then again, if you’re investigating this towards the end of your life insurance policy, or many decades after starting it, then the cash surrender value might be more worthwhile.
5- Sell to a Life Settlement Company
Last but not least, there are life settlement companies who will happily buy your full term life insurance policy. They’ll generally offer a sum greater than the cash surrender value but less than your death benefits. It’s worth noting that you might still be taxed on whatever you get from the sale though. Having said that, you might now be in a position where you can no longer, or even want to, pay your premiums. Moreover, if your life circumstances have changed then deciding to sell your life insurance could be a good way forward.
If you’re unsure about the best course of action though, you can talk to a life settlement broker or agency. They’ll have the information, including if you’re legible, so that you can better understand the process, how much you’re set to gain and whether this is the right option for you. Of course, this is potentially a tough time you’re going through. after all, none of us want to think about the elderly stages of our lives. Nevertheless, the experts can support you and make the process straightforward.
Key Takeaways to Access more than the Cash Surrender Value of your Life Insurance Policy
There are many reasons you might need some extra cash ranging from supporting your grandkids with college tuition to paying for extra healthcare expenses. Therefore, make your life insurance work for you and your family by maximizing its cash value. Clearly, only you will know which option is the best for you although talking to insurance brokers and your insurance company can help guide you. Either way, don’t be afraid to investigate and continue supporting your family in the best way possible for you.