You’re probably familiar with life insurance. You know that it pays a cash benefit to the beneficiary if the insured person dies while the policy is in force. The beneficiary can use the cash for any reason—to cover final expenses, replace lost income, cover living expenses, pay off debts, fund college, save for retirement and so much more.
But did you know that a life insurance policyholder may be able to use his/her life insurance policy while he/she is still alive? Yes—life insurance has more uses than just a death benefit.
Here are two ways you may be able to access the value of your life insurance policy while you’re still alive!
1. Purchase a living benefit rider
You may not be familiar with the definition of an insurance
rider, but we’re here to help! A rider is optional, additional coverage that
you can purchase to enhance your insurance coverage.
When it comes to life insurance, a living benefit rider gives you the option to accelerate your death benefit if you’re certified by a licensed health care practitioner as having a permanent chronic illness or severe cognitive impairment.
So how does the living benefit rider work? If you’re certified as being permanently chronically ill, the rider may pay you a lump-sum or monthly payment that’s deducted from your total death benefit.
The advanced death benefit is paid directly to you and can be used for any purpose. Replacing lost income, covering medical expenses, paying for care and making home modifications are just a few examples of what the money may be used for. The payments can help provide calm and stability during your time of need.
Even if you use your living benefit rider and receive advanced death benefit payments, your beneficiary may still receive a death benefit after you pass away. Any remaining money that isn’t advanced to you will be left and paid out to your beneficiary. This money may help cover your final expenses and provide security for your loved ones.
2. Tap into your life insurance policy’s cash value
The second way you may be able to use your life insurance policy while you’re still living is to tap into your policy’s cash value. In order to do this, you’ll need to have a permanent life insurance policy. Permanent life insurance is a category of coverage that can be kept in force for a lifetime and can build cash value. You can withdraw and borrow from your policy’s cash value as needed for any reason—helping fund college, paying off debt or supplementing your retirement income.
Depending on your policy, there are a few ways you may be able to access your policy’s cash value:
- Loans — You may be able to take a loan from your accumulated cash value for any reason. You may have to pay interest on your loan, just as you would with a personal loan or credit card. Typically, you can repay the loan on your own schedule. However, if you don’t repay it, the loan amount will be deducted from the policy’s death benefit.
- Withdrawals — Another possible option is to withdraw money from your policy’s cash value. With a withdrawal, you don’t have to pay interest. However, a withdrawal may affect your premiums and reduce your death benefit.
- Surrender — By surrendering your life insurance policy, you cancel it. This releases all the cash value to the policyholder. The downside is you lose your life insurance coverage and the peace of mind that you’re providing financial care and support for your loved ones.
We’re here to help
Life insurance is for protecting the people you love most, but don’t forget that it may also benefit you while you’re still living! Are you ready to learn more about life insurance? Give us a call at (800) 525-7662, and we’ll pair you up with a local Washington National agent, who can answer all your questions.
Definitions, limitations, exclusions and requirements of accelerated death benefit riders may vary by issuing company, rider, policy and state. Talk to your agent for more information Insurers and their representatives are not permitted by law to offer tax or legal advice. The general and educational information here supports the sales, marketing or service of insurance policies. Based upon individuals’ particular circumstances and objectives, they should seek specific advice from their own qualified and duly-licensed independent tax or legal advisors.
Insurers and their representatives are not permitted by law to offer tax or legal advice. The general and educational information here supports the sales, marketing or service of insurance policies. Based upon individuals’ particular circumstances and objectives, they should seek specific advice from their own qualified and duly-licensed independent tax or legal advisors.