Do I need to pay back my life insurance loan?

If you’ve borrowed against the cash value of your life insurance, you may be wondering, should I pay off my life insurance policy loan? Especially if you’re facing a serious illness, worrying about unpaid debt may be the last thing on your mind; however, not paying back a loan against your insurance policy could significantly impact your finances and those of your family. It’s important to first understand what a life insurance policy loan is and how it works. Policyholders who need quick access to cash—such as if they’re diagnosed with a serious illness and have mounting medical bills—may be able to apply for a loan through their insurance company that can give them access to the cash value of their plan. Not everyone is eligible, though: Such loans are only available to those with whole or universal plans, not term, and are only worth up to the amount the policy has accrued in cash value; those who haven’t been paying into their policies long enough for them to accumulate such value may not be able to secure a loan. When it comes to the question, should I pay off my life insurance policy loan, you should learn about the particular provisions of your loan. Most insurance companies that allow policyholders to borrow against their policies’ cash value require that you pay the loan back in full before your death. During that time, the loan will accumulate interest—at a rate that may be as high as 8%—which can make the payback amount drastically increase over time. Do Insurance Policy Loans Mandate Repayment? Most insurance policy loans, however, don’t mandate...

Pros and Cons of Guaranteed Life Insurance for Cancer Patients

If you’re facing a serious medical diagnosis or approaching your later years, you might be starting to think about your final expenses. Though it’s not a pleasant event to plan for, many people feel some peace of mind from knowing that, when they do pass, they’re able to help their families lay them to rest without incurring significant debt, and may even be able to leave them some extra money to support their own financial futures. As you explore your options, you may have come across the topic of guaranteed life insurance. What is Guaranteed Life Insurance? If you’re not familiar with the term, guaranteed life insurance is largely exactly what its name suggests: It’s a way for people who have exhausted other options for insurance to be approved, mostly with no questions asked. While that may sound too good to be true on its face, guaranteed life insurance does come with both pros and cons. Here are a few: What are the Pros of Guaranteed Life Insurance? A serious medical condition like cancer usually restricts someone from applying for life insurance, as the company typically wouldn’t want to take on the liability of a policyholder who may not live long. Seniors also often have trouble being approved for traditional policies, which may have them seeking out alternatives, such as simplified whole life insurance, an option that allows applicants to be at a moderate health risk. However, many may not even qualify for that type of plan, which is why guaranteed life insurance can be a very valuable tool. With such a plan, a policyholder does not have to...

Will my Life Insurance Policy affect my SSI?

Financial outlets like Social Security and life insurance proceeds can be significant sources of assistance for those who are in need of financial assistance, including for medical conditions like cancer. A health scare—especially one that has such a high price tag attached to it—may prompt you to re-examine your financial health, as you strive to make sure you can meet the pressures of mounting medical bills and still protect your financial future, and that of your family. As you work to get your finances in order, you may wonder how your Social Security and life insurance proceeds may impact one another. Social Security benefits like Supplemental Security Income (SSI) can, in some cases, be affected by your life insurance, but it’s important to first understand the nuances of your insurance policy, as well as your particular SSI profile. What is SSI? SSI is a government program that provides payments to seniors (over age 65), as well as those who are disabled. Income and assets are considered in how much SSI benefits an individual can qualify for, which is where the question of Social Security and Life Insurance proceeds comes in. Are Loans Against My Life Insurance Policy Earned or Unearned Income? If you have a term life insurance policy, you won’t be affected, as such policies build no cash value. However, if your whole or permanent life insurance has cash value, your eligibility for—and amount of—SSI benefits could be impacted. SSI weighs applicants’ earned and unearned income, and dividends being paid from a life insurance policy’s cash value are considered unearned income. The federal government also views a loan...