One of the benefits of holding whole life insurance is being able to contribute to a cash value as you pay your premiums. Slowly but surely, the amount adds up, collects conservative interest, and grows from occasional dividends.
So, the money is there, but how do you take out the cash value from life insurance?
There are a few different answers. You can take out a loan from the policy, cancel it, “surrender” a portion of it, or sell it.
Should I Take A Loan Out from my Policy?
One option for accessing the cash value in your life insurance is to take out a loan from your insurer.
Technically, the money you receive as the loan doesn’t come out of your cash value, but your cash value backs it.
This means that, should you fail to pay back the loan, your insurer can take the amount of the loan (plus interest) out of your cash value to cover their losses.
It’s a pretty safe bet for them. Either you pay them back or they’ll take what you owe them out of your cash-value account—no need for them to track you down or repossess anything.
Should I Terminate My Whole Life Insurance?
Deciding to cancel your whole life insurance is a pretty big deal. It’s in your insurer’s best interest for you to continue paying your premiums. So, they often penalize your cash value with fees when you cancel—particularly if you haven’t held the policy for very long.
We’ve written before to help people decide if they can cancel whole life insurance, or if there is a better option.
As a recap, canceling your policy does give you your cash value–minus any cancelation fees. At that point, you no longer have to pay premiums, but you are also no longer insured. There will be no death benefit given to your beneficiaries. In many situations, this is worth keeping in mind.
Like canceling your policy, a surrender is a permanent action, typically taken when you have no intention of putting money back into your policy. When you make a full or partial surrender, the money you take out from your cash value can’t go back in.
This is fine if you’re using the cash value to supplement retirement income, for example.
It is important to note that while your cash value will decrease the same amount that you withdraw, the value of your death benefit will decrease by a more substantial amount.
Because every dollar of cash value is guaranteed to grow over time, a surrender gives up not just the present value but the future value as well.
Can I Sell My Life Insurance Policy?
If you’re looking to go the traditional life settlement route, unless you fit a specific set of circumstances, the answer is likely no.
And if you do qualify, the life settlement group is essentially purchasing from you the rights to your death benefit. So you might get ahold of the cash you need, but again, at the cost of losing your death benefit.
However, if you’re looking to sell your policy with Aspen Life Settlements, the answer is likely yes.
We are looking to purchase a wide range of policies, regardless of your age or health condition. And the best part? You get to keep your death benefit-at little to no cost to you.
We typically pay you the same amount you would get from your insurer if you canceled the policy, and sometimes even more.
Get in touch today to find out how much your policy could be worth!