Life Insurance

If you have a life insurance policy, this may also be a source of funds. Since you probably purchased the policy to provide financial support to your family, these options should be considered carefully and with the advice of a financial advisor. There may be a variety of ways to obtain cash from your life insurance:

Loans
You may be able to get a loan from your insurance company or other lending institution using your life insurance policy if you have a permanent type of policy such as Whole Life or Universal Life. If a loan is available, details will be stated in the policy.

Accelerated death benefit
You may also have the option of receiving a “pre-death” benefit from your life insurance company if your life expectancy is less than 1-2 years. This type of provision is fairly new, so you may have it even if it is not mentioned in your policy. Ask the insurance company.

Viatical settlements
This is the sale of a life insurance policy for cash. The insured person (called the viator) sells his or her life insurance policy to a third party for a lump sum cash payment. The payment is often only between 60 percent and 80 percent of the face value of the policy, but is usually tax free. The purchaser of the policy becomes the new owner and sole beneficiary of the policy and pays the premiums. When the viator dies, the entire death benefit from the policy goes to the new beneficiary.

As with all these options, it is important to think about the short-and long-term consequences for you and your family. If you are able, consult with a financial advisor to understand all the pluses and minuses of using your life insurance policy to help with your financial needs during your treatment.

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