To pay for cancer treatment, you might need to consider using your life insurance policy as a source of income. This is a complex matter. Before you decide to make changes to your life insurance coverage, talk to your life insurance provider, a tax planning professional or someone knowledgeable about life insurance policies and financial planning.
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What to Think About Before Converting a Life Insurance Policy
- Know about the types of life insurance policies you have and what your options are to convert the policy into income.
- Discuss your specific needs and options with your policy administrator, a tax planning professional and/or someone who is knowledgeable about life insurance policies and financial planning.
- Identify and understand all of the financial benefits and potential effects of converting your life insurance policy into income.
- Consider that whatever you receive from a life insurance policy now will ount your beneficiary will receive later.
Talk with loved ones and close friends before making the decision. There may be other options, such as a personal loan or the sale of something you own. You can also find out about Federal and State Benefit Programs. For example, some programs help people obtain Health Care Assistance for Uninsured.
Understand Your Life Insurance Policy
Your policy or certificate document will specify the type of policy and describe the options available for converting your life insurance into income. Here’s what you need to know:
Do you have a Group or Individual Life Insurance policy?
- Group life insurance policies are offered to people who belong to a specific organization, such as through an employer, association or union. With a group plan, the policy is issued to the group and a certificate is given to the individual members as proof of coverage.
- Individual life insurance policies can be purchased directly from an insurance company or through an insurance agent or broker. They are available to those individuals who meet the insurer’s guidelines and pay the required premiums.
Do you have a Permanent or Term Life Insurance policy?
- Permanent life insurance provides coverage throughout your life regardless of your health condition. This type of policy accumulates a cash value, which can be used as a loan source or collateral for a loan.
- Term life insurance typically covers your life for a specified period of time, usually 1, 5, 10, 15, 20, 25 or 30 years. Most term policies do not build cash value but can still be used to convert to income.
When a loan is given against a life insurance policy, the lender usually expects to be repaid from the policy’s death benefit after the policy holder dies, and you would not typically be required to repay the loan during your lifetime.