There are so many benefits to having a life insurance policy, and so many motivations for investing in one, but they all boil down to a single reason – to protect your loved ones for the future. Unfortunately, as our circumstances change and unexpected expenses arise, the money that is represented in your policy may seem more useful in the form of cash you can use now then in a future gift to others. The idea of selling your life insurance policy for cash may seem like an easy solution to an economic shortfall, but there are several disadvantages that you need to be aware of – and a number of better alternatives.
Disadvantages to Selling Your Life Insurance for Cash
When you make the decision to sell your life insurance policy for cash it is referred to as a life settlement. You are selling your policy to a company that will base the amount of cash it provides on your age and your health, the death benefit on the policy, the premiums that need to be paid, and other factors. These companies are looking for a good investment for themselves, so the lower the premium and the older you are – or the shorter your life expectancy – the more likely it is that they will make you an offer.
The company will assume payments for your premiums and they will receive the death benefit when the policy holder dies. There is nothing left for the original beneficiaries, and selling the policy may result in tax consequences, an inability to qualify for Medicaid, the release of private information throughout the application process, and even intrusive follow-ups by the company that purchases the policy to check on your health. You also may not be able to get an additional life insurance policy if you need one, and if you are able to then it is very likely that the premiums will be much higher than your original policy was due to the fact that you are now older and any change in your health.
Don’t Sell Your Life Insurance Policy Without Knowing Your Other Options
Interest in selling a life insurance policy for cash is generally driven by some kind of emergency such as a job loss or diagnosis with a catastrophic or terminal illness. There are a number of options available that may avoid the disadvantages cited above and still provide you with much-needed cash. These include borrowing money from your cash-value policy or taking advantage of what is known as the accelerated death benefit that most life insurance policies offer. In both of these cases the policy holder is able to take a portion of their death benefit early without it having any tax implications. Though it reduces the total amount of the final death benefit, these options also retain some of the value of the policy for the original beneficiaries.
Consider a Life Insurance Loan
There is another alternative for those who are facing an advanced stage illness. Fifth Season Financial offers the ability to take out a life insurance loan that quickly provides you with a portion of your death benefit, eliminates your need to continue paying the premium for your policy, yet still may provide your beneficiaries with a benefit at the time of your death. Known as the Funds For Living Program — it provides almost immediate financial relief. There are no out-of-pocket expenses and your life insurance policy remains in place, with all fees paid out when the policy proceeds are paid. Qualification is simple, and requires only that you have been diagnosed with a life-threatening or advanced stage illness, that you own a life insurance policy of at least $75,000, and that you are a permanent resident of the United States. The application process is simple and fast, and in most cases people receive between 35 and 70 percent of their policy’s death benefit.
For more information on how the Funds For Living Program can help you, call the compassionate professionals at Fifth Season Financial today.