If you are terminally ill, your life insurance policy is a valuable resource. Not only can you use life insurance to provide adequate income to your survivors for their short- and long-term needs, but you also may be able to receive a portion of the death proceeds from your life insurance before you die in order to pay necessary expenses or to fulfill a dream.
Guaranteed Insurability Rider
When you are terminally ill, you pose an obvious risk to an insurance company, and you will probably be unable to buy additional life insurance coverage. However, if you purchased a guaranteed insurability rider (additional purchase option) when you bought your policy, you may be able to buy additional life insurance without providing proof of medical insurability.
Change Your Dividend Option
If your insurance policy pays you annual dividends, you may be able to purchase more life insurance. Check the dividend option currently in effect. If the dividends are left to accumulate or used to reduce premiums, most policies will allow you to switch to a paid-up additions option. This allows you to use the dividends to buy fully paid-up additional life insurance on yourself with no proof of medical insurability.
Buy Credit Insurance
If you are taking out a loan to buy a big-ticket item, and you are still employed, you may be able to purchase credit life insurance that will pay off the balance of your loan when you die.
Check Your Company’s Group Life Insurance Program
If you are still employed, you may be able to purchase additional life insurance through your company’s program with no evidence of medical insurability. This may be available at any time or only during an open enrollment window usually provided annually.
Life Insurance Can Help Provide Adequate Income to Your Survivors
The more life insurance you purchase, the better your survivors will be protected financially after you die. Therefore, even though your premiums will rise (and possibly strain an already extended budget), you should seriously consider purchasing the maximum amount of coverage available to you.
You May be able to Take Out a Loan Against the Cash Surrender Value
If your life insurance policy has a cash value component, you may be able to get a loan from the insurance company using your policy as collateral. Keep in mind, however, that taking a loan against your policy will reduce the death benefit and cash value of the policy.
You May be able to Apply for Benefits from an Accelerated Death Benefit Rider
You may own a life insurance policy that includes an accelerated death benefit rider. If so, you may be eligible to receive part of the face amount of the policy in advance of your death, in either one lump sum or installments. You can use the proceeds however you wish, and if your life expectancy is 24 months or less, the proceeds will be nontaxable to you. You may also be able to elect to take less money than the full amount available to you, so that some benefit will be payable to your survivors.
You May Want to Sell Your Policy to a Viatical Settlement Company or Provider
A viatical settlement is the sale of a life insurance policy to a third party, usually a viatical settlement funding company owned by a group of investors. When you sell your policy, you will generally receive between 40 and 85 percent of the face value of the policy, and you can use the cash payment any way you wish. Many individuals use the proceeds to pay medical costs or living expenses, while others use the proceeds to fulfill a final dream or to experience the joy of giving money away to others. Although you would get less now than your beneficiaries would get if you kept the policy, the advantage is that you get the proceeds of your life insurance while you are alive. Any money that you do not spend can be left to your beneficiaries through your will. The money you receive from a viatical settlement is free from income tax if your life expectancy is 24 months or less.
If you have questions, contact the Experts at Henssler Financial:
- Experts Request Form
- Email: experts@henssler.com
- Phone: 770-429-9166.
Disclosures
The following information is reprinted with permission from Forefield, a division of Broadridge Financial Solutions, Inc. This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
