Terminal illness can be a serious strain on your finances. Terminal illness lasts for a long time. People suffering from terminal illness often spending their last pennies trying new treatments or paying for expensive medications. If you are suffering from any terminal illness or you know someone who is suffering from terminal illness, do not over look life insurance as a source of funds. Life insurance can provide you with funds if you are diagnosed with terminal illness.
You can get a pay out amount with most life insurance polices. However very few insurance companies offer buy out options with term life insurance. If you have a whole life insurance policy, you can take out loans against your insurance policy, often up to 90% of the face value. If you want a life insurance policy which you can cash out if you become terminally ill, then universal life insurance is the best policy for you. The cash out value of the policy will depend on the length of the policy and how much you have invested. To get funds from your universal life insurance policy, all you need to do is to request funds from your policy manager. If you have a whole life or a term life insurance policy, you will have to enter into a viatical settlement if you need the funds. In a viatical settlement, you name a third party as the beneficiary of your policy and the third party, usually an investor will pay you a sum of money which is less than the face value of the policy. The difference between the face value of the policy and sum of money you get is the investor’s profit. You can generally get anywhere between 60% – 75% of the policy’s face value in cash. On your death, the investor will collect the entire value of the policy from the insurance company. How much you will receive for your policy will depend on how much longer you are expected to live and the face value of your policy.
Most viatical settlements require the policy holder have a life expectancy of less than two years and that the policy be at least two years old. The Health Insurance Portability and Accountability Act of 1996 makes the proceeds of viatical settlements federal tax free for people who are terminally ill (a life expectancy of under 2 years). Most states make the proceeds of viatical settlements state tax free.
