Did you know that you can use your life insurance to meet chronic illness and other expenses. Changes in federal tax laws have made the prepayment of death benefits under a life insurance policy possible. Most new life insurance policies have a feature which provides access to a part of the death benefit, which can then be used as living benefits.
Chronic illness means inability to perform at least two activities of daily living (eating, bathing, continence, dressing, using the toilet, or transferring) or severe cognitive impairment that requires substantial supervision from another person to protect from threats to health and safety. A life insurance policy with one of these newly developed riders or a long term care rider can provide policyholders with benefit payments to help cover their care. With long term care riders and others that offer additional benefits, an insured suffering from a permanent chronic illness can “accelerate” his or her cash value plus a portion of the “net amount at risk” (difference between the death benefit and cash value). The portion of the net amount at risk that can be advanced depends on the policy and the insured’s age at onset of the chronic illness. Generally you will need to wait for sometime before benefits can be accelerated. However some states have laws that prohibit such waiting periods. You can use the benefits in any way you want, regardless of actual expenses incurred for treating the chronic illness. How you should not use such life insurance policies as a substitute for long term care insurance. Such policies may not work if you have limited financial means or if you are on Medicaid. Such policies build vale making them an asset that could prevent you from Medicaid eligibility.
Even if your life insurance policy does not have these features and you want money to meet chronic illness and other expenses, you can get the funds by entering into a life settlement. A life settlement is a financial transaction in which you sell your life insurance policy to a third party for a price higher than the cash surrender value offered by the insurance company. The purchaser becomes the new beneficiary of the policy and is responsible for all subsequent premium payments. Life settlement can get you cash on your life insurance policy even before death. You usually receive a much higher surrender value than what the issuing insurance company attaches to the policy. There are no restrictions on the use of this money. You can use it for any purpose including meeting chronic illness and other expenses.
