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A Hidden Asset – Life Insurance

September  09,  2014 in

Individuals suffering from advanced stage illnesses often experience financial hardship in addition to their medical hardship. It’s the last thing someone needs to deal with when their life and health is on the line. But, what if there was a way to provide a source of financial relief from some of the stress associated with their advanced stage illness?

When people purchase life insurance, usually the primary motivation is to ensure that their loved ones are financially protected after the policyholder dies.  Upon death of the insured, policy proceeds can be used to replace lost income, pay off debts, educational costs, funeral expenses, or costs to settle the estate. However, if the individual with advanced stage illness owns a life insurance policy, they should be aware that it is a hidden asset that can provide financial relief now, rather than waiting until after the insured dies.

Two Types of Life Insurance Policies

Broadly speaking, there are two types of life insurance policies; permanent and term.

Permanent policies — whole life and universal life — have higher premiums that can build up a cash value which can be accessed prior to death.

Term policies have lower premiums but do not have any cash value.

Whether permanent or term, most people don’t expect to derive any significant benefit from their life insurance policy until death.   However, that is not necessarily true.   Under certain circumstances, the life insurance policy could be used to generate immediate cash while the insured person with advanced stage illness is still alive.

For policyholders with advanced cancer or other life threatening illnesses, there are specialty lenders who will provide cash advances that are solely secured by the policy’s death benefit (i.e.- face amount).  The funds received are generally 35%-60% of the face amount and the lender pays all future premiums.  There are no loan payments during the individual’s lifetime; the full loan balance is repaid by the policy’s death benefit.

Quality of life is extremely important to individuals suffering from an advanced stage illness.  Knowing that there may be financial relief available for those in this unfortunate situation can sometimes provide the peace of mind needed to live a better quality of life. As medical bills pile up from the costs of treatments and medications, people start to worry about the costs and how it not only affects them, but their family as well.  Using life insurance as an asset can help take the financial worry away and be part of the answer that allows individuals to focus on quality of life and enjoying time with family.

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