Domonique Rodgers of NC State is an insurance agent at Family First Life. In the following article, Domonique Rodgers discusses the four ways that a life insurance policy can be used to work for, not against, a policy holder, even while the client is still living.
Financial protection for one's family is incredibly important. Typically, life insurance is thought of as one of the best ways to provide this after the death of the person holding the policy. However, Domonique Rodgers of NC State says that this is not the only way to profit from life insurance. If looking for other ways to accomplish this, people may ask: Can I use my insurance policy while I'm still alive?
Domonique Rodgers explains that policyholders can gain from a life insurance policy before death by taking a withdrawal or loan from the policy, selling the policy, using a living benefit rider, or even using the provided cash benefit to pay premiums. However, Domonique notes that this is dependent on which policy the policyholder has.
Domonique Rodgers on Utilizing the Policy Before Death
It can be a grim idea, selecting and maintaining a life insurance policy for benefits that the life insurance holder will, by nature, not be able to see the benefits of. However, below, Domonique Rodgers of NC State has compiled a list of just four ways a life insurance policy can be used while the policyholder still lives:
- Take a Withdrawal or Loan from the Policy
- Sell the Policy Itself
- Use a Living Benefit Rider
- Use the Cash Benefit to Pay Premiums
Domonique Rodgers of NC State takes an even closer look at each of these methods, analyzing what makes them so beneficial to a life insurance policyholder while still living.
Take a Withdrawal or Loan from One's Policy
Domonique Rodgers of NC State says that this option is best utilized with a permanent life insurance policy, meaning it has accumulated cash value. However, a permanent plan is not the only kind of policy that offers this option. Examine which kind the policyholder has: universal, whole, and variable policies can also give this benefit.
To do this, borrow money against the actual cash value of the life insurance policy when taking a loan. Domonique Rodgers notes that the policyholder will not be able to enact this benefit unless life insurance premiums have consistently been paid off. This is because each life insurance policy will do the holder little good until after it has accrued cash value.
This way, if the policyholder is in need of cash, perhaps to pay off a vacation or large expense, a loan can be obtained against their life insurance plan. Remember to repay this, however, in order to keep the death benefit. Otherwise, a death benefit can be greatly reduced by accumulated interest charged on the loan itself.
Sell the Policy Itself
This may sound extreme, but selling a life insurance policy is a very lucrative move, depending on how long payments have been made towards it. Find a broker who is reputable and factor in the fees necessary to pay this broker for the best results. These fees can reach around 30% of whatever cash is made from the sale of the policy, and it does not factor in tax payments.
This method of profiting off of a life insurance policy while still alive is called life settlement. It is not often used except as a last resort, but it is a good way to get out of a dire situation wherein the policyholder can no longer afford to pay for coverage.
Use a Living Benefit Rider
Domonique Rodgers of NC State explains that living benefit riders allow the policyholder to obtain a small amount of the death benefit before dying, but only in the case of a terminal illness that lowers life expectancy to under a year. Though this is a sobering option, the policyholder can then use that money to pay for any expenses, such as medical procedures, caused by the illness.
Use the Cash Benefit to Pay Premiums
Only some policies permit this option, but accumulated cash value could be used to actually offset premium costs. This does not apply to term life coverage, but is applicable in permanent life insurance policies. It is a popular option with retirees to cut life insurance costs without entirely losing the coverage.
In Conclusion
In conclusion, Domonique Rodgers of NC State says that there is no requirement to wait until after a policyholder's death to make life insurance policies work positively. Depending on the kind of coverage or package available, one can borrow loans against their policy or even sell the policy altogether. While the mortality that makes life insurance necessary is inevitable, waiting until death to benefit is not!
