When you’re young and have a growing family, one of the best decisions that you can make is to start paying into a life insurance policy. In the long run, having a life insurance policy will help your loved ones and your legacy enormously. It will help ensure that, when you’re gone, your loved ones will have financial relief when they may need it desperately.
But this isn’t all that a life insurance policy is good for. Through something called a “viatical settlement,” it is also possible to sell a life insurance policy and receive the funds before a death claim is made — that is, while you’re still alive. In certain cases, this can benefit your finances. Here’s what you need to know.
How life insurance works
Before we dive into the circumstances under which you might sell a life insurance policy, let’s talk briefly about how a life insurance policy works.
When you get life insurance, you’re not insuring yourself against some unlikely event like a house fire or a car crash. Unless you’ve discovered something that you haven’t told the rest of us about, your death is a sure thing. A life insurance company promises to pay the death benefit to your beneficiaries when you pass away, which is a good thing, because the death of a loved one is extremely expensive. Life insurance is even more vital when you are the main or sole breadwinner in your family. If you were to die prematurely, you may leave a huge financial burden on your loved ones. Life insurance makes sure that they can still get by.
Life insurance companies have to make money, of course. One way that they do so is by keeping the premiums of folks who stop paying into their policy. Once you stop, you’re generally giving up your coverage forever — and you don’t get a refund. So make sure that you’re always getting that bill paid in time.
When money later is worth less
Life insurance can be a huge help to those you leave behind. So why would you want to sell it for cash now, while you’re still here? The answer lies in expenses and debt.
If you’re terminally ill, your medical bills can mount fast. The treatments and equipment that you’ll need to extend your life and keep yourself comfortable can, at times, be more than you can afford. And if you start going into debt, you’ll be putting your legacy and your loved ones’ futures at risk.
That’s because debt, of course, grows larger with each passing day. When you borrow money, you agree to pay it back with interest; when the loan is a short-term one, you’ll pay extremely high interest rates. It can be all too easy to get trapped in the cycle of debt.
And if you go deep into debt, you could end up bankrupt. A huge portion of American bankruptcies are caused, at least in part, by medical debt. Furthermore, the mounting debt and damage to your finances could end up being far greater than your eventual life insurance payout. If only you had that money now, you could pay down your debt and avoid that terrible future. You’d be able to leave something behind besides unpaid bills.
And you can get that money now, explain the experts at Sell My Life Insurance Policy. Their appropriately named organization is one of the ones that assists with viatical settlements. Essentially, they’ll trade cash now for your eventual life insurance payout. Having that cash in hand can help you pay off debts and live more comfortably.
Clearly, there are times when selling off your life insurance settlement makes sense. You may never need this option, but you ought to know about it.