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In 2019,44% of U.S. insured households, I chose a life insurance with cash value.
This cash value is a sum of funds that we can withdraw and use at any time.With the accumulation of time, the amount of cash value will become considerable.
When we may no longer need life insurance -If the children have married and established a business, we have no debts and our financial situation is sufficient to cover future expenses, We may choose to cancel the policy and withdraw the cash value from the policy account at one time.
In this case, there is actually a better way to get people’s life insurance policyCash valueTo serve us, the following 5 methods can help maximize the value of our insurance policy.
1. Borrow money
The insurance company invented a method called "Policy lending"the concept of,Provides a way for you to borrow money from your own insurance policy.
It is generally believed that this way of using money is better than withdrawing funds directly from the insurance policy-because the borrowed money is tax-free.
In addition, because it is borrowed money, we can repay it at any time. If we don’t plan to change it, then when we die, the debt we owed to ourselves will be deducted from our death claim.
In this borrowing process, the insurance company will charge interest on the borrowed money-"borrowing money" without interest is not considered by the IRS to be "borrowing money."
When we apply for life insurance, every insurance company’s contract will specify how much interest is and how to calculate if borrowing money from the insurance policy.The terms used by insurance companies vary, but in general they are between 4% and 8%.
The interest rate for borrowing money is not roughly related to the market benchmark interest rate.
(>>>Recommended reading:What is the difference between the "borrowing" of life insurance and the "owing" of borrowing money from the bank?）
2. Change life insurance to annuity insurance
The special policy formulated by the Internal Revenue Service allows us to convert the cash value in a life insurance policy into an annuity insurance contract.This process is tax-free and is called1035 exchange of insurance, Sometimes referred to as "policy upgrade" or "policy conversion".
(Click to read: 1035 conversion strategy)
Through the 1035 exchange, the original life insurance contract was cancelled and suspended, and a new annuity insurance contract was opened at the same time.This process is irreversible, and the new annuity insurance contract can be the product of different insurance companies.
And the advantage of doing this is,The policyholder may get more retirement income.
For example, if the cash value in a life insurance policy account is $10, after transferring it to an annuity insurance account, it may become a lifetime income of $12.
(Click to read: What is long-term care? What is the time window for purchasing long-term care insurance?)3. Pay for long-term care
Long-term careIt is a major financial risk faced by retired families.
If we consider the long-term care situation and prepare to applyLong-term care insurance, Then one of the methods is,Take our existing whole life insurance,WithLong-term care additional termsLife insurance products, orHybrid long-term care insuranceproduct.
4. Mortgage the loan with a life insurance policy
The cash value of a life insurance policy is an asset, Can help us apply for loans from borrowers.In some specific occasions, the cash value of life insurance can be used as collateral for loans.
Using the cash value of a life insurance policy as collateral is usually better for banks than financial products such as stocks as collateral.
If you use the cash value of life insurance as collateral for borrowing, please learn more about it with the assistance of a professional insurance consultant.
(>>>Recommended reading: Forbes｜Is life insurance an asset? )
5. Leave it there without moving
No one forces us to use the cash value in the policy.If the policy is in good condition, and we are not financially risky, we can put life insurance there and don't touch it.
The cash value of the policy will continue to grow and accumulate, and in the end, we will leave this life insurance claim money to our beneficiaries. (End of full text)
