The refrain, "I need money - that's what I desire," has been singing for over 50 years. Whole life insurance policyholders can access "a whole lotta money" in several ways. Here's a rundown of how the top 1% uses life insurance as a cash reserve. Join our free webinar, "Surprising Secret From the Rulebook," for an in-depth look at the money-saving strategies used by the top 1% of earners.
How To Cash In On Your Life Insurance Policy In A Pinch
Turn In Your Policy For Its Cash Value
Various policyholders still choose this despite being aware of the many others who access them when their coverage is no longer wanted, needed, or affordable. We usually advise against doing this because you'll lose all policy advantages. Moreover, you could be selling yourself short.
Sell Your Life Insurance
Selling your policy and the rights to your death benefit is one option for getting fast cash, as we've discussed in our Life Settlements blogs. In the last several decades, this choice has been increasingly accessible.
The elderly and dealing with significant health difficulties may find it easier to find potential purchasers for their insurance. What if, though, you're beyond 50 and still running marathons?
Withdraw Whole Life Cash Value
Part or all of your cash value may be withdrawn tax and penalty-free if you cancel less than your "basis". Since the funds were already yours, there's no need to make repayments once they've been withdrawn.
Since no fees, taxes, or paperwork are involved, this might be a better alternative than a home equity loan or taking money out of a 401(k) or an individual retirement account. If you need access to cash quickly but don't want your cash value to stop rising, you may want to investigate the following option for cashing in on your life insurance policy.
Get A Loan Against Your Whole Life Insurance Policy's Cash Value
Customers can get loans against their cash value by applying directly with their life insurance provider. The worth monetary acts as collateral, and the corporation already has it, so the procedure is quick and easy.
You may be able to refinance your loan through your bank if the interest rates are more favorable and use the cash worth as security. The phrase "borrowing your monetary value" is frequently used, even by financial consultants.
However, that is an incorrect and misleading expression. The monetary value itself is not what you are borrowing. When you borrow money from your insurance provider, you essentially borrow against your cash worth.
- Use a Death Benefit Advance
You might use the policy's death benefit as collateral to get a loan from a financial institution or individual. According to what was said in Number One, you'll need to be in your 80s or 90s before this becomes a viable possibility.
However, it might be preferable to sell your insurance, depending on your circumstances. And if you need the cash — for instance, if you're fighting cancer or another catastrophic sickness — research whether or not your coverage has the following provision:
Get Your Death Benefits Early
Whether or not you have access to this choice depends on the customizations you made to your policy. To review your life insurance policy, you need to get in touch with your provider.
They know if a death benefit may be paid out early or not. If so, you may be eligible to receive benefits equal to a percentage of the policy's face value if you can prove that you have a covered illness or diagnosis.
Annuity Policy
This is not a reversible choice like borrowing against your policy. Therefore it's best to consider it only as a last resort. This choice is usually made available by insurance providers. This choice will enable your insurance to begin paying you like a reverse mortgage.
You can provide money to your loved ones for a set amount of time, say 10 or 20 years, your life expectancy, or for your life plus an additional sum. During that time, you would get a certain amount of money every month.
Cash Out Dividends
The difference between merely getting by and thriving may be as little as this "extra" money, so it's worth a look if that's the case. You can earn tax-free dividends on a whole life insurance policy on your basis if you want to get them in cash instead of buying paid-up additions.
9. Set Up A Charity Trust With Your Policy
Don't forget about charitable remainder trusts when thinking about ways to cash in on life insurance. You can benefit the charity and minimize your capital gains tax bill by selling an asset in such a trust.
The donor can get a steady income from the investment earnings generated by the charity receiving the insurance.
