22 Oct A Hidden Asset- Life Insurance
By Robert Bernstein, Fifth Season Financial
Individuals with a serious medical condition, such as cancer, may be experiencing financial hardship, as well. It’s the last thing someone needs to deal with when their life and health is on the line. But, what if there was a way to provide a source of financial relief from some of the stress associated with their medical condition?
When people purchase life insurance, the primary motivation is to ensure that their loved ones are financially protected. Life insurance policy proceeds can be used to replace lost income, pay off debts, educational costs, funeral expenses, or costs to settle the estate. However, if an individual with a serious medical condition owns a life insurance policy, they should be aware that it is a hidden asset that may be able to provide financial relief now, rather than waiting until after the insured dies.
Broadly speaking, there are two types of life insurance; permanent and term.
Permanent policies—whole life and universal life—have higher premiums that can build up a cash value, which can be accessed prior to death. Term policies have lower premiums but do not have any cash value.
Whether permanent or term, most people don’t expect to get any significant benefit from their life insurance policy until death. However, that is not necessarily true. Under certain circumstances, the life insurance policy could be used to access immediate cash while the insured person with a serious medical condition is still alive.
For policyholders with advanced cancer or life threatening illnesses, there are specialty lenders who will provide cash advances that are solely secured by the policy’s death benefit. The funds received are generally 35%-60% of the face amount and the lender pays all future premiums on the policy. There are no loan payments during the individual’s lifetime; the full loan balance is repaid by the policy’s death benefit.
Quality of life is extremely important to individuals suffering from a serious medical condition. Knowing that there is financial relief available can sometimes be the peace of mind they need so they have a better quality of life. As medical bills pile up from the costs of treatments and medications, people start to worry about the costs and how it not only affects them, but their family as well. Using life insurance as an asset can help take the financial worry away and be part of the answer that allows individuals to focus on quality of life and enjoying time with family.
This article was originally posted September 2014 in the Fifth Season Financial blog. For more information, visit (www.fifthseasonfinancial.com).