Did you know that over 54% of all Americans are covered by some kind of life insurance policy?
With over $750 billion paid out in benefits and claims every year, life insurance is one of the most essential financial products to invest in.
Life insurance policies are, in some ways, treated as an asset. This means that you can take a loan against it or even cash out a life insurance policy if you ever need the extra cash.
If you’re looking for ways to cash out a life insurance policy, you’ve found them. Here are a few different ways you can cash your life insurance policy.
Withdraw from your Policy
Life insurance is one of the only insurance policies that are considered an asset with an associated cash value. This means that if you ever need the money, you could technically withdraw from the cash value of the policy.
You can withdraw partially from your policy or even withdraw the entire cash value of the policy. This isn’t the same thing as surrendering or closing your policy but rather just reduces the cash value of the payout at the end of the policy.
Taking a Policy-Backed Loan
Since life insurance is an asset, you can even take a loan based on the policy. This works similarly to how a mortgage works, as you take a loan based on the value of the house. With this method, you can take a loan based on the cash value of your policy.
Surrender Your Policy
If you are struggling financially and can’t manage to take a loan against the cash value of your policy, you can choose to surrender the policy. This option lets you draw out the complete term life insurance cash value. However, this is subject to a taxable surrender fee.
Life Settlement Method
The life settlement method is a unique way to cash out a life insurance policy. This option allows you to trade your life insurance policy for a cash payment through a life settlement organization. This is one of the easiest ways to cash out your policy but does come with a few risks.
If you’re thinking about going with the life settlement method, be sure to do some research on the life settlement pros and cons beforehand.
Cash Out a Life Insurance Policy
Whether you need the money or want to invest in something else, there are a few different ways you can cash out a life insurance policy. You can borrow from your policy or even choose to cancel your life insurance policy completely.
Whatever you decide, be sure to do some research and read up on your exact policy to make sure there aren’t any hidden penalties you may not be aware of.
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