Question About Your Affordable Life Insurance Policy
Can a life insurance policy be cashed in?
If you have a permanent policy like a whole life or universal life policy, there will often be a cash value element to the policy. For term policies, there is no cash value accumulated in those types of policies. If you have a life insurance policy that has a cash value attached to it then you may be able to surrender (cancel) the policy or take out loans to access the accumulated cash value amount. Cheap life insurance.
Can a life insurance policy be used as collateral?
In some cases the cash value in a permanent life insurance policy can be used as collateral to secure a loan, dependent largely on the requirements of the entity issuing the loan. For businesses loans, it is common for the lender to request to be made the beneficiary of the policy as well.
Do life insurance policies expire?
Term life insurance policies do expire at the end of the “term” or period of time. Permanent policies like whole life or universal life do not expire, but can be cancelled if premiums aren’t paid.
Can you sell your life insurance policy?
Yes. Life insurance settlement companies will buy your policy in certain situations and usually only whole or universal life policies are what they buy. These life insurance settlement companies primarily look for people who have permanent policies with some level of cash value attached. Depending on the policy and the life insurance settlement company, it is not uncommon for those selling their life insurance to receive 50% to 70% of their total death benefit when the policy is sold.
Life insurance terms to know
Can anyone take a life insurance policy out on you?
At one point in time, anyone would have been able to take life insurance policies out on another person; however, the laws regarding this have changed and the insurance companies are strict on complying with these regulations. Currently, one must not only prove that another person’s death can cause some sort of financial impact to them but they also have to obtain authorization of the proposed insured (the person being covered) for this coverage.
A great example would be if you were wanting to get life insurance on an aging parent. While there may be a financial impact to their death (e.g. the family home is being left to you, but it still has a mortgage and their death would pass this burden on to you), you would still be required to obtain their authorization for this coverage. Even in this situation, it would be easier for all parties involved to have the parents get their own policy and make you the beneficiary
Can I have multiple life insurance policies?
Yes. Many people carry multiple life insurance policies for various different reasons. Some will carry a whole life policy, a term policy for their business, and an accidental death insurance policy. Others may have a group term life insurance policy through work and own another term life insurance policy on the side.
How does a life insurance policy work?
Life insurance policies are simply legal contracts. The life insurance company (the insurer) offers to cover you (the insured) per the terms in the contract and pay the person(s) listed in the policy (beneficiaries) the agreed upon amount in the contract (death benefit) in exchange for an paying agreed upon amount (premium).
Which life insurance policy is best for me?
Regardless of what anyone may tell you, there is no one policy that is “best”. Determining which policy is best for you depends largely on what you are needing the coverage for and what your financial goals are. For the majority of the people out there, a basic term life insurance policy works the best for what they need. For others, permanent policies like universal or whole life works better. To fully understand which solution is best for you, you have to understand what your current and future needs are going to be.
What are life insurance policy loans?
When someone has a permanent life insurance policy, they will have a cash value account attached to their policy. With these types of policies the owner of the policy is able to take loans against the life insurance policy’s cash value to access the funds. In the event the insured dies and the loans haven’t been paid backed, the outstanding amount is deducted from the total death benefit upon payout.
What is the difference between an annuity versus a life insurance policy?
A life insurance policy protects you if you die too soon; an annuity protects you if you live too long. Annuities are offered by life insurance companies as a way to protect against running out of income during retirement and require either a large lump sum up front or a period of regular contributions similar to a 403(b), a retirement account for government employees and nonprofit organizations. Once the annuity itself becomes annuitized, disbursements from the annuity begin and can last a few months or through the life of the owner’s surviving spouse depending on the agreed upon terms at the start of the annuity.