It may be a rough time for you right now. Money is tight and you’re trying to get creative to find ways to pay the bills. You know your life insurance policy has a cash value, but you’re not quite sure how to utilize it. As you think more in-depth about your financial situation, consider these ways you can use your life insurance policy to receive cash.
1. Withdrawls
Assuming your policy comes with a cash value, you have the option to withdraw cash from it. The amount of cash you are able to receive will depend on your policy. To ensure you fully understand how this type of transaction works, meet with a tax professional and your licensed insurance Agent.
With that, understand how withdrawing cash may affect your death benefit. The funds you leave behind for your loved ones may decrease due to the amount you have withdrawn. On the other hand, to keep your death benefit consistent, you may have to pay higher premiums. It is up to you to recognize your need for life insurance and what coverage amount is best for your situation.
2. Surrender your policy
To surrender a policy means you are canceling your policy. You can receive cash value for turning it in. At this point, you must consider why you wanted life insurance in the first place. While you may use the funds you receive for whatever needs you have, you will no longer have coverage if you die. Moreover, understand surrendering your policy may come with fees. Consider how these fees will affect the final value you receive to gather whether this is the most beneficial situation for you. It can potentially be more difficult to get another policy in the future, if you decide you do in fact want and need life insurance.
3. Life Settlement
You have the option to sell your policy to a broker. Different companies will buy life insurance policies from people by offering cash. With that, they then own the policy and they are the ones who pay the premiums. In the event of your death, they receive the benefit. Generally, they target those who are over 65 years of age. They look for those who have a life expectancy of less than 15 years.
After gaining a basic understanding of your cash value options, be sure to reach out to tax professionals and your licensed life insurance Agent. They will be able to give you the most accurate analysis of your situation and will help you understand the best path for you to take.
Categories: Insurance, Group Life Insurance