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7  Ways to Capture the Cash Value of Life Insurance

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You have heard it once and you’ve heard it a million times, life insurance is an essential part of your financial savings plan; a plan that benefits your family’s well-being in the future. If you pass away all of a sudden, a life insurance plan will help secure all your family’s expenses from the mortgage to the utility bills.  Keep reading this post to know more about obtaining cashing out a life insurance policy.

For policyholders who have invested in the universal life insurance policy there are several ways they can obtain money through their life insurance when needed, listed below are some of the ways:

  • Surrender your policy for its cash value:

This option is pretty affordable and is sometimes mistaken as the only option that is out there for insurance holders to get money.

  • Sell your policy:

As mentioned before, the one major way you can get money from your policy is by selling it. By doing so, you surrender your policy and the rights to your death benefit. This option has been available to the public only since last few decades, and the popularity has only been increasing since its inception. Selling a life insurance policy can be quite profitable for people who are retired and don’t have a continuous flow of income anymore.

  • Withdraw your cash value:

If you want to withdraw money, that is below the number of premiums that you have paid for your policy. Then you withdraw a part of your policy or the whole lump sum without paying any kind of penalties or tax charge. You don’t need to pay back the amount of money you have withdrawn as it was your money, to begin with. But you will need to remember that your cash value stops growing because you withdraw money from it. So, we move on to the next option.

  • Borrow against your cash value:

When people want to borrow money against their cash value, they usually approach their insurance company for a loan. Since the cash value acts as collateral and it is in the company’s possession the process can be fast and easy. If your bank has better loan rates you can borrow there, and still use your cash value as collateral.

The public and financial advisors usually talk about borrowing against your cash value, but that is a misleading phrase and it’s inaccurate as well. You don’t borrow the cash value itself rather you’re borrowing the money and leveraging the cash value by borrowing against it.

  • Borrow against your death benefit:

In some situations, you can borrow from your insurance company or bank by using your death benefit as collateral, which means that selling your policy will not be an option unless you ‘re in your 80s or 90s. It really depends on your situation this is the better alternative if you don’t wish to sell your policy.

If you require the money for medical care, you will want to know if your policy will have the necessary benefits.

  • Receive an accelerated death benefit:

Whether or not you have this option available, will depend on what riders you choose when you buy the policy. You will definitely want to get your policy reviewed to see if you have an accelerated death benefit that is available to you.

  • Annuitize your policy:

In contrast to borrowing against your policy, this is a non-revocable choice that should only be optimized later on in life with the help of a trained professional. Most insurance companies offer this as an option. Not unlike a reverse mortgage, this policy will allow your policy to pay you. You can select a certain time period and along with that how much amount you are willing to pay to your beneficiaries. After which you will receive a specified income each month during that time frame.

Conclusion:

Don’t let the cash value accumulate in the long run in your permanent life insurance policy, without deciding how you are going to treat it. Also always make sure the cash value is drained and redeployed later.

For more information on how to obtain cash from your life insurance, you can ask a trusted insurance agent and they will guide you through the process.

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