Cashing In A Life Insurance Policy
Most people go through lean economic times at some stage or stages in their life
. Unexpected expenses, a failed investment or being retrenched are only three circumstances which can put pressure on your bottom line. One possible way to find financial relief is to cash in your life insurance policy. Now "cash in" is an expression which can involve a number of possibilities. Here are just four of them."Sell the policy
"Make a withdrawal
"Obtain a loan
"Life settlement
Before discussing the ways you can access cash from your insurance policy, it"s only fair to point out that short term pain might result in long term gain. In other words if you don"t sell or cash in your policy, in X number of years you may really appreciate having the benefits. But if you do sell you will have a reduced income or none at all.
Selling or cashing in the policy is usually allowed. But the younger your policy the less its value as opposed to a policy which has been operating for decades. A "young" policy will yield a low financial return.
Clearly a "young" policy has less going for it than one which has been in operation for decades. So making a withdrawal of some of the premiums paid is an option but again the length of time you"ve held the policy influences the amount of cash available.
Some insurance companies will allow you to borrow money using your life insurance policy as collateral. As with the other situations, the longer you"ve held the policy the greater its value and thus the greater amount of cash you may be able to borrow.
The final situation involves you selling but not surrendering the policy. You sell the policy to someone else or to a company and they then take over the premiums and of course gain any payout when you pass away. There are conditions for this type of transaction such as you being a certain age and, medically speaking, having a life expectancy of say 10 or 15 years. Conditions vary with each policy and the company issuing them. With a Life Settlement situation you could get more for the policy than its worth at the time but, as always, you forfeit the potential payout as you no longer own the policy.
So that brings us back to the original question; is it necessary, is it worth cashing in your life insurance policy? Your situation is unique as is your policy and your insurer. Before making any decision, get all the facts related to such a move. It may not be possible, that is it may not be allowed for you to cash in your policy. But even if it is allowed, is it the best move for you and if so, what is the best way to raise cash using the money you"ve already invested in your policy.
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