Understanding Key Terms in Your Life Insurance Policy

The benefits of life insurance are innumerable — from the peace of mind you get knowing you can protect your loved ones in the future to the immediate financial assistance that a policy can generate in an emergency, such as through a Life Credit Living Benefit Loan. With so many advantages, however, comes complexity, as there are myriad policies and ways in which they can be maximized. To navigate that confusion, there are some life insurance terms to know that, once you’re familiar with, can build a foundation to help you determine the best way to buy and use life insurance. Life Insurance Terms to Know Dividends: If you have what is known as a “participating policy,” you may be eligible for a portion of the life insurance company’s profits, which are known as dividends. You can apply them to your premiums, take the dividends as cash, buy additional insurance or many other options. Cash value: This refers to the value that has accumulated in a permanent, or whole life, policy. As you pay premiums, a portion of each is set aside to generate cash value that you can later borrow against or, depending on your policy, withdraw. Beneficiaries: This is the person or persons who will receive the death benefit associated with your policy after your passing. You can name one or more individuals, and should periodically revisit the beneficiary list. Surrender value: The surrender value refers to the amount you would get if you opted to cash out your policy, as the insurance company may levy hefty surrender fees, significantly lowering the cash value. That’s why many...

The Viatical Settlement Checklist

Life insurance is often considered as a means to help loved ones pay for your final expenses; however, situations may arise that would make having access to those funds prior to your passing the smartest financial option. Life Credit’s Living Benefit Loan Program allows you to borrow against your life insurance policy’s death benefit in order to cover cancer care and other pressing financial obligations. Another option is  a settlement called a viatical, life insurance can be sold to another party. There are pros and cons to viatical settlements, which each person needs to carefully consider before choosing the path that’s right for them. What happens under a viatical settlement? This is an option that can only be considered when someone is diagnosed with a terminal illness, typically with a life expectancy of less than two years. In this case, the person may want to access the funds to take care of end-of-life planning, such as home care or hospice. Consulting with your medical team to have them assess and document your prognosis should be one of the first steps anyone should take who is considering a viatical settlement. Other factors to consider are the length of your policy — viatical life insurance settlements usually only apply to policies older than two years — and whether the policy was issued by a licensed and insured provider. The value of the policy is also a major consideration, and one that involves its age, the cost of the premiums and the unique health circumstances of the policyholder. What happens under a viatical settlement is that the buyer will often agree to...

5 Riders to Consider in Your Life Insurance Policy

Life insurance policy riders can be vital tools for protecting yourself and your loved ones, adding extra value to your policy. There are many different types of riders, and all are designed to meet specific needs, allowing you to custom-build a policy to your unique circumstances. Many riders are incorporated into an insurance policy upon initial purchase, but some life insurance companies may allow you to add on riders throughout the duration of your policy. As always, consult with an insurance professional to determine which rider may be best for you. Here are five of the most common life insurance policy riders you may want to consider to ensure you’re getting the most out of your policy: 1. Long-Term Care Rider: Life insurance with a long-term care rider enables you to draw upon your policy’s death benefit long before you pass away. You can use the funds for assistance with care, such as paying for a home-care nurse or for living expenses at a nursing home or assisted care facility. Typically, eligibility requirements mandate that policyholders be unable to perform a number of daily tasks by themselves, such as dressing or eating. This type of rider can be an effective way for policyholders to avoid having to drain savings or retirement plans and also ensure they can benefit from their policy while still alive. 2. Living Benefits Rider: This type is another of the life insurance policy riders that allows you to access your death benefit before you pass. In order to qualify, you usually have to have a chronic or terminal illness; if approved, you can use the...

How does your Life Insurance Cash Value Build?

If you’re considering purchasing life insurance or are exploring ways to maximize the benefits of your policy, you’re likely looking to answer the question, how does life insurance build cash value? A policy’s ability to accumulate cash value over the years can provide a significant benefit to a policyholder, as he or she may be able to tap into these funds in case of emergency or can use them to pass along to heirs. While many nuances that determine a policy’s cash value, there are some standard protocols that most insurance companies follow: Term vs. Permanent: One of the first things you have to determine when looking to answer how does life insurance build cash value is what type of policy do you have? For instance, term life insurance is only applicable for a certain period of time and does not acquire cash value while permanent life insurance does. If you think you may want to take advantage of the cash-value option, you’ll need to explore the best permanent life insurance policy for you. Type of Policy: There are a number of different permanent life insurance policies that build cash value, all in varying ways. Whole life policies lock in a rate of growth, which the company and policyholder agree to and which doesn’t change, while universal policies rely on current interest rates to determine the growth. Another option is variable, in which the funds are invested and cash value grows according to the success of the investments. Premium Payments: Cash value starts to build through the policy holder’s premium payments. Typically, insurance companies divert the payments into three distinct...

How is my Death Benefit Calculated?

A life insurance policy’s death benefit can be a vital resource. In the event of someone’s passing, the funds can be used to cover final expenses, as well as to address income gaps left by the loss. Some people may also opt to draw on the value of the death benefit while they’re alive, such as through Life Credit’s Living Benefits loans, which allow policyholders to borrow against their death benefit to manage medical emergencies such as cancer. Regardless of how you intend to use it, a life insurance death benefit payout can be a significant source of financial assistance, both for policyholders and their heirs. However, it’s important to make educated and informed decisions when you’re enrolling in a policy to ensure the payout will be sufficient. While each policyholder will have individual circumstances — such as varying numbers of dependents or unique health concerns — there are some common ways to determine what your life insurance death benefit payout should be before you finalize a policy. One strategy is to add together the policy holder’s annual income, the cumulative amount that would be lost if he or she died today (presuming he or she would work through average retirement age) and burial costs. Even though this total may seem high, it allows for a worst-case scenario that would enable the person’s family to continue receiving the financial support this person had provided during life if he or she was to pass away at an early age. Once the desired amount of the life insurance death benefit payout is calculated, you can then shop around to find a...

3 Reasons Against Viatical Settlements

If you’re facing a financial crisis because of a medical diagnosis, you may be considering selling a life insurance policy. On the surface, this option may seem like the right path, if you can net enough money to pay your bills and live out the rest of your days without focusing on finances. However, for those with terminal illnesses, selling a life insurance policy through a process known as a viatical settlement can have many unintended side effects — putting your financial health, and that of your family, at risk. So just why are viaticals a bad investment? Here are three of the primary reasons to steer clear of these settlements and consider instead options like LifeCredit’s Living Benefits Loans, in which you simply borrow against — and not sell — your life insurance policy. 1. Jeopardizing Your Finances When you enter into a viatical settlement, you’re selling a life insurance policy for less than it’s worth. You’re not only cheating yourself out of that money you deserve but you may also be jeopardizing your current income. Because of the influx of cash, you may be cut off from income-based benefits like Medicaid — again, these are benefits you deserve and have paid into; however, the viatical settlement may mean this income that you likely count on could end. Additionally, you will have to pay taxes on the amount you receive in the viatical settlement, which could significantly reduce the total. 2. A Gamble with Time Those who are considering selling a life insurance policy may have received a terminal diagnosis and are likely scrambling to get their affairs...