Life insurance comes in a variety of shapes and sizes and we will show you how to use life insurance while alive.
Depending on your personal financial situation and long-term goals, a term, whole, universal, or variable policy may be advantageous.
However, a no-exam life insurance policy may also make sense if you want to avoid the traditional medical exam.
Overview of Life Insurance
While most people think of life insurance as something you leave to your beneficiaries after you die, there are some ways you can use it while you’re still alive.
This can be used to pay off debt, make mortgage payments, or simply to help finance large purchases. However, not all policies allow for early access. If you want to include this in your plan, you must first do your research.
If you’re looking for life insurance, get a free price quote first so you know what to expect.
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How to Use Life Insurance While Alive
You can secure life insurance while you’re alive. Here’s how to do that:
Get a Whole Life Insurance Policy
Whole life insurance, like universal and variable life insurance, is a type of permanent life insurance. Permanent life insurance policies will allow you to withdraw funds from your account while you are still alive.
Term life insurance, on the other hand, does not have a cash component that policyholders can access. If you intend to use your life insurance as a cash reserve, you should avoid term policies.
Just keep in mind that, due to the cash value, whole life insurance policies are typically more expensive than term policies.
Furthermore, once the policy is activated, you will not have immediate access to cash. Before you can use it, you must have enough cash in the account (which takes time to accumulate).
Surrender Your Policy
Assuming you have a policy with a cash component, you could surrender it and withdraw the entire cash value.
Again, this assumes two things: that you have a cash policy and that you have built up enough value in the policy over time that there is something substantive to take out.
If you don’t meet both of those requirements, you won’t be able to use your life insurance while you’re still alive – or you’ll have to wait until there’s a large enough amount to withdraw from.
Borrow from Your Policy
If you do not want to surrender your policy outright, you may be able to obtain a loan based on the existing cash value.
Just keep in mind that the amount you eventually owe on the policy’s outstanding principal (and interest) will be deducted from the death benefit before your beneficiaries receive it.
Still, because your credit will not be checked, this may be a better option than using a credit card or taking out a personal loan. You’ll also most likely have better repayment terms.
It Can Pay for Your Long-Term Care
Long-term care riders are available on some life insurance policies. This means that you can use life insurance to pay for long-term care services such as assistance with daily activities or nursing home alive.
You can use a portion of the death benefit to cover these costs.
It Can Help out If You Have a Terminal Illness
Some policies include an accelerated death benefit rider or an illness rider. If you are diagnosed with a qualifying terminal illness or a chronic illness that meets the criteria of your policy, you may be able to access a portion of the death benefit.
These funds can be used however you see fit, such as covering medical expenses, traveling, or leaving a legacy while you’re still alive.
It Adds to Your Retirement Income
In some circumstances, the cash value of a permanent life insurance policy can be used to supplement your retirement income. This is frequently accomplished by purchasing an annuity that provides a consistent income stream.
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The Bottom Line
It’s a common misconception that you can’t use your life insurance while you’re still alive. Not only can you use it, but it may be a better vehicle than other types of credit.
Just keep in mind that the benefits provided by a life insurance policy will vary depending on the type of policy and the options you select when purchasing your coverage.
If you’re interested in the advantages this option can provide, start by requesting a free price quote.
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