The acts of procuring life insurance, organizing estate planning or creating end-of-life arrangements are rarely ones we are eager to initiate. However, having your desires clearly addressed, and your loved ones properly taken care of will always be worth these difficult planning processes.
If you are looking to amend or establish such policies for yourself, it is helpful to know your options and how to make them work for you.
Life Insurance Is an Investment
Dating back to the early 1900s, life insurance policies were ruled as a legal form of investment, just like traditional stocks and bonds. As such, an individual can cash out their policy, pursue a life settlement, or take advantage of a viatical settlement. Though the insured is generally going to lose a percentage of what they have paid over the lifetime of the policy, there are times when receiving a lump sum or installments of cash may be more beneficial than death benefits.
Cashing Out Your Policy
You are the first investor in your life insurance policy, meaning that you have access to a particular cash value from your policy based on how long you have held it. If at some time in the future, you do not feel the need for your existing policy and see more use in cashing it out, this is a choice you can make. However, the cash value will be based on what you have paid toward the insurance thus far, so it will be far lower than the total value of your policy.
Selling to Investors
Another way to receive immediate funds from your insurance policy is by selling to a third-party investor. Generally, this transaction would be chosen later in life when the cash value of your policy has grown in size, but that is not a pre-requisite. Arranged through a broker, these options are referred to as life or viatical settlements, and it is important to know these terms are often interchanged. Though these transactions are similar in nature, life settlements do not require the policyholder to have a terminal diagnosis.
Why You Might Opt for Life Insurance Alternatives
Though we can find similarities in many of our life circumstances, each individual’s experience is unique and has its own set of issues to address. A traditional life insurance policy is put in place to help those we leave behind. Death benefits can off-set funeral expenses, other unsettled debts, or provide a financial boost to those you love. However, these benefits may not always be needed and having the cash in hand prior to one’s death could be more advantageous. If other expenses are taken care of, beneficiaries are comfortable or no longer part of your life, or current expenses are decreasing the quality of your life, selling your policy may be the best decision for you and your loved ones.
No one anticipates financial distress or the inevitability of death, but having a life insurance policy is a wise investment that can bring peace of mind in a variety of ways.
I agree that everyone should have some sort of life insurance policy. It is very helpful to have it to pay final expenses.
Everyone does need some sort of life insurance. Even if there’s no one you want to leave the money to, you’ll likely need it to pay your final expenses. Most of us need life insurance.