Accessing Cash Value
If your life insurance policy has built up cash value, you can borrow against it. You must repay the loan; otherwise, the amount owed plus interest is deducted from the death benefit. Alternatively, you can surrender the policy and receive a check for the cash value, but then you no longer have life insurance coverage.
Accelerated Benefits Rider
Some life insurance policies include an accelerated benefits rider. This allows you to access a portion of the death benefit if a doctor expects you to live one year or less. Typically, you can receive up to 25% of the death benefit, subject to a maximum dollar amount. The insurer pays the remaining balance to your beneficiary after your death. A small charge may apply to cover administrative costs.
Viatical Settlements
A viatical settlement lets you sell your life insurance policy for cash while still alive. The new owner, usually a viatical settlement broker, takes over premium payments and becomes the beneficiary. Companies generally pay about 60% of the policy’s face value, depending on your age and health.
Although viatical settlements can provide cash when you need it, they reduce or eliminate the death benefit for your dependents. Before selling or surrendering a policy, discuss the decision with a trusted financial advisor. They can help you understand tax consequences and long-term financial impact.
