Life Insurance Loans Archives - Life Credit Company

Why Would People Avoid Life Insurance Loans and Credit Programs?

Like with any loan program, borrowing against life insurance can sometimes make people wary, as they worry about taking on more debt. While mounting debt is certainly an issue that can impact some people negatively, loans themselves don’t have to necessarily be risky—and can actually be productive. Particularly when it comes to one’s own investments, such as lending against life insurance policy, being able to draw value on that product to combat other debts is a sensible and practical approach.   If you’re weighing whether to borrow against life insurance, you first need to have life insurance explained in a way that makes sense for your particular situation. Many people anticipate only using the death benefit of their life insurance policy after their death, to help pay for final arrangements and take care of their loved ones. However, if a financial crisis arises, such as a cancer diagnosis, life insurance can be a logical source of income: Policyholders may have paid into the plan for decades and, by drawing on its value, they can address pressing, and often quickly escalating, financial needs to improve their quality of life and possibly even their prognosis.   So what happens when you borrow from life insurance? There are pros and cons of life insurance loans, depending on the program. Like most loans, life insurance loans typically involve interest, so policy holders will have to pay back the debt, along with the added interest, to regain control of the policy.   However, the benefits that life insurance loans—both immediate and long-lasting—bring can far outweigh whatever interest the policy holder incurs. Having the ability...

What is a Death Benefit Rider?

Life insurance is traditionally understood as helping people plan and prepare for the end of their lives. Many policyholders aim to use the amount of their plan to help beneficiaries pay for things like funeral costs, to settle final arrangements or to help reduce debt once they have passed. However, after the lifelong investment that many sink into a plan, they should be able to use the value whenever they need it and, that’s where a death benefit rider may come in. How Does a Death Benefit Rider Work? A rider functions like an add-on to an insurance plan, allowing the policyholder to opt for certain protections that are customized to his or her particular situation. There are different forms a death benefit rider can take, but many center on giving the individual access to the cash value of his or her insurance plan while he or she is still alive. For instance, an accelerated death benefit generally enables policyholders who have been diagnosed with a terminal illness to draw cash advances against the value of the death benefit. Another option is the enhanced death benefit, which pays out the highest investment gain the policy attained, even if the market value is less. Those with a variable annuity death benefit may be able to attach riders to enable cash advances and a payout that is higher than the minimum. Pros and Cons of Death Benefit Riders Death benefit riders can help policyholders customize a plan that makes sense for them; however, there are some factors to consider. Riders do increase the cost of a plan, which could be a...

What is a Viatical Settlement?

If you’re looking to sell your life insurance policy, you have likely encountered the concept of a viatical life settlement. While such a life settlement can provide quick cash, it does so at a cost—and for some, that price may be too high. What is a Viatical Settlement? Weighing the pros and cons of a viatical settlement first comes down to understanding what it is. A viatical settlement involves the sale of a life insurance policy to a third party. This type of life settlement typically occurs when a person is facing a terminal illness and would rather have a lump sum of money from his or her life insurance while still living, as opposed to passing the death benefit down to a beneficiary. This arrangement, also called a senior settlement, usually results in a payment that is higher than the cash value of the policy, yet less than the death benefit. Essentially, the policyholder is compromising on the policy’s value in order to be able to get a rapid payoff. Often, such money may be needed to ease the burden of medical bills, or could even help a person live out his or her final months in comfort. However, a viatical settlement isn’t the only option for those looking to draw value from a life insurance policy. What Other Options Are There? Loans on life insurance can also provide financial assistance to cancer patients and others in need. Such options, however, don’t involve the full surrender of a life insurance policy, but rather a temporary transfer, which means the holder and his or her family can ultimately regain...

What is the Meaning of Absolute Assignment?

When you purchase life insurance, you typically do so to prepare for after your death. However, an insurance policy is an owned entity and, as such, can be sold or used as collateral for a loan in order to provide cash value to someone in need. Just as there are many questions when considering which type of life insurance to get, there are also a lot of factors to consider if using that policy to access the cash you’ve invested in it. It’s important to understand terms like absolute assignment and collateral assignment, as well as weigh the differences in order to satisfy your particular financial needs. What is absolute assignment of life insurance? Absolute assignment in insurance involves signing over your entire policy to another person or entity. The person who is selling or gifting the policy is known as the assignor, and the individual or individuals who receive it are the assignee. The assignee takes full ownership of the policy, being held liable for any premiums and also having the authority to change or designate new beneficiaries. What is a collateral assignment of life insurance? Collateral assignment of life insurance essentially works like a standard loan. The insurance policy is “collateral” for a loan, and the person or organization that pays out that loan is the temporary beneficiary of the policy’s death benefit until the loan is repaid. The entity taking over the policy does so on a conditional basis and, therefore, doesn’t have the authority to make changes to it, re-sell it or take any of its cash value. Instead, the assignee can only draw on...

10 Overlooked Living Benefits of Life Insurance

Life insurance is typically considered something that assists people after death—however, permanent life insurance with living benefits can provide immediate, and significant, financial assistance to people in need. A living benefit rider can be written into a life insurance policy to allow the client to draw upon the policy’s cash value in the event of a terminal illness. What are the benefits of whole life policy with this option? Financial assistance: Mounting medical bills from serious illnesses like cancer can quickly bankrupt a patient. Future financial security: Taking care of debt associated with a medical crisis as it occurs helps families avoid years of complications. Peace of mind: Knowing that you can tap into the cash value of your life insurance policy may provide a needed sense of security in an otherwise worrisome time. Dignity: Having access to financial assistance means a patient with a terminal illness is able to control his or her final days. Stress reduction: Stress has been shown to increase a person’s risk for medical complications, so someone fighting an illness can benefit physically from being able to proactively manage finances. There are life insurance advantages and disadvantages, however, as not all plans offer the living benefit option. For instance, if you’re considering what are the benefits of term life insurance, it’s important to note that term policies don’t allow policyholders to draw on the cash value during life, as they’re only available for a certain length of time. That’s where Life Credit’s Living Benefit Loans can come in. The benefits of this program include: Financial help, regardless of policy: Life Credit provides loans no...

Can Term Life Insurance Have Cash Value?

When an unexpected financial challenge hits, many questions may abound: Should you tap into your savings? How can you access cash without getting into too much debt? Can you borrow from your life insurance? That last question is a complex one, as there are many types of life insurance, and different ways to use your policies. Many people view life insurance as a long-term solution, often just to be passed down to future generations. However, there is the potential for life insurance policies to have cash value that can be of vital assistance in a financial pinch, like those often faced by cancer patients. Before delving into this topic, policyholders need to first determine the type of coverage they have. Whole, or permanent, policies protect the holder for the entirety of his or her life, and accumulate cash value that can be borrowed against. The more you pay into the policy throughout your life, the more cash value it ultimately has. Term insurance, on the other hand, is designed to only function for a set amount of time; unlike whole coverage, term does not accumulate cash value. If the set timeframe expires, the policyholder does not have access to any of the premiums he or she paid throughout its duration. However, there are some exceptions to this structure, such as Life Credit’s Living Benefit Loans. Life Credit pays up to half of a person’s death benefit on his or her life insurance policy, regardless of the type of policy. Even if you are a term policyholder, you can borrow from your life insurance, if it has a value of...