Every savvy Canadian knows that a life insurance policy is vital in protecting their family and financial future, but what about while they’re alive? Today we’ll discuss if and how policyholders can take advantage of their life insurance’s cash value supply.
Whole life insurance policies guarantee that your loved ones will be able to continue meeting their financial needs after your death. The cash value aspect of your policy can also be used as a policy loan, for withdrawal, to increase the death benefit, and more while you are alive. Consider the following aspects and strategies to see if cashing in whole life insurance is right for you.
Considerations Before Cashing In
Whole life insurance policies provide both the death benefit and cash value for individuals. The death benefit is received by beneficiaries after the policyholder’s death, and the cash value can be accessed in a myriad of ways throughout the policy’s duration.
Some individuals may use the cash value aspect of their whole life insurance policy to accumulate savings or a nest egg, while others may decide to bypass it altogether, concentrating on the death benefit for their beneficiaries.
Beneficiaries do not receive the cash value upon a policyholder’s death, so policyholders should be familiar with how to take advantage of this cash value while they can.
Ways to Cash in a Whole Life Insurance Policy
Over time, some individuals may find that they no longer need the death benefit, as their beneficiaries and estate are financially secure. If this is your case, insurance professionals such as Sim Gakhar urgently advise you to utilize your cash value to its fullest through different ways we will discuss below.
If the death benefit is still important to you and your family, there are other ways you can take advantage of your cash value. Let’s start with those.
Use the Cash to Pay Your Premium
After you have accumulated enough cash value, some of it can be used to cover your monthly insurance payments. This process, called “paying up”, is honored by a large array of Canadian life insurance companies.
Reach out to Sim Gakhar to see if this tactic will work with your policy. By paying up, you could save thousands of dollars in premiums each year. For most policies, this will not affect your death benefit.
Borrow Against the Cash
Borrowing cash against your whole life insurance cash value is done through a policy loan. Policy loans are often given at much lower interest rates compared with local Canadian banks.
These loans may be a suitable choice if you need a lump sum of money now, but you know you’ll be able to pay it back down the line.
Technically, you are not obligated to pay back this loan; however, any money you owe, including interest, will be deducted from your policy’s death benefit upon your passing.
Increase the Death Benefit
For those focused on their family’s financial cushion, boosting your death benefit could be possible through your cash value.
If you’ve decided that passing down your death benefit is essential, you may be able to increase that death benefit once your cash value grows to a significant size. Since you won’t be using your cash value for yourself, you can use it as leverage with your insurance company to request a larger benefit.
If you’d like support during this process, feel free to reach out to investment and insurance agent Sim Gakhar. Sim can help you reach out to your insurance company, requesting an increase on your death benefit in exchange for the cash value you’ve accumulated within your policy.
Let’s say you have acquired $50,000 in your cash value for a policy with a $100,000 death benefit. These negotiations could and should empty your cash value to $0 and increase your death benefit to $150,000.
Make a Withdrawal
Most Canadian whole life insurance policies allow for partial or even full cash value withdrawals. Individuals may choose to withdraw their cash value if they face a sudden financial emergency.
These withdrawals directly affect the amount of your death benefit. Some insurance providers reduce the death benefit by the exact amount you withdraw from the cash value, but others may reduce the benefit by more than the amount you withdrew.
To clarify what your death benefit’s reduction would be, be sure to consult with Sim Gakhar before requesting the withdrawal with your provider.
Grow Your Nest Egg
A nest egg is defined as a sum of money saved for the future. Some people use their nest eggs to purchase property, pay for their children’s education, or their retirement.
Whole life insurance cash values have become a popular option for those looking to diversify their retirement savings. Cash value accumulates tax-free, so be sure to take advantage of this deferment if you’re looking to increase your nest egg.
You won’t be able to add cash value to your retirement portfolio off of the bat – each policy requires a set amount of time to pass before permitting access. Speak with Sim Gakhar about your policy today to see if or when you’ll be able to put your cash value towards your retirement.
Surrender Your Policy
Surrendering a whole life policy relinquishes all benefits, meaning your beneficiaries will receive nothing upon your death.
Surrendering your whole life policy is a sure way to receive your cash value, but it should only be done if you are sure you want to abandon your policy and the death benefit that comes with it.
Someone surrendering a policy will incur surrender fees and have to pay income taxes on their acquired cash.
To Cash In, or Not to Cash In?
Deciding what you want to do with your whole life insurance’s cash value is a big decision. Cashing in may mean lowering or eliminating your death benefit, although it may also provide you with the cash you need through a withdrawal or policy loan.
Schedule a call with Sim Gakhar today to walk through all of your options when it comes to cashing in your whole life insurance policy. Sim will be happy to answer all of your questions so that you make the right choice for yourself and your future.
FAQs & Helpful Resources Regarding Whole Life Insurance
- How To Cancel Your Whole Life Insurance Policy?
- Should I Keep Whole Life Insurance Policy?
- When To Cash In Whole Life Insurance?
- Are The Dividends Vested in Whole Life Policy?
- Can I Buy a Whole Life Policy For My Kids or My Parents?
- Can I Convert My Term Life Insurance To Whole Life?
- Can You Have Both Term and Whole Life Insurance?
- Difference Between Participating and Non-participating Whole Life Policies
- Do I Have to Pay for Whole Life Insurance Forever or Can There Be a 10 Pay or 15 Pay Option?
- Does the Death Benefit Increase or Remain the Same in the Whole Life Policy?
- How Long Does Whole Life Insurance Last?
- How Much is Whole Life Insurance in Comparison to Term Insurance?
- How to Draw Funds from Your Whole Life Insurance Policy
- How to Use Cash Value of Whole Life Insurance
- How to Use Whole Life Insurance to Create Wealth
- Is the Whole Life Insurance Cash Value Taxable?
- Is There Any Age Limit to Buy Whole Life Policy?
- Is Whole Life Insurance a Good Investment?
- Is Whole Life Insurance Permanent?
- Should I Buy Term Life Insurance or Whole Life?
- Should I Buy Whole Life Insurance for My Child?
- Should I Convert Term Insurance to Whole Life?
- Should I Get Whole Life Insurance?
- What are Paid-Up Additions in Whole Life Insurance?
- What Are the Benefits of a Whole Life Insurance Policy?
- What are the Different Options to Draw The Cash Value From the Whole Life Policy?
- What Are The Different Types of Whole Life Policies?
- What are the Features of Whole Life Insurance?
- What Happens to The Death Benefit If We Draw The Cash From The Whole Life Policy?
- What Is Cash Surrender Value on Whole Life Insurance?
- What Is Enhancement Option in Whole Life Insurance?
- What Is the Difference Between Universal and Whole Life Insurance?
- What Is the Guaranteed Cash Value and Dividend Value in the Whole Life Policy?
- What is The Taxable Benefit of Whole Life Insurance?
- What Is Whole Life Insurance Used For?
- What to Look for When Planning to Buy a Whole Life Policy?
- Where To Get Whole Life Insurance?
- Which Is Better – Term Life or Whole Life Insurance?
- Which Is Better, Term or Whole Life Insurance?
- Who Has the Best Whole Life Insurance?
- Why is Whole Life Insurance Good?
- Why Whole Life Policy is More Expensive Than Term Policy?
Other Types of Life Insurance Products You May Want To Check Out
- Business-Owned Life Insurance
- Life Insurance for Estate Planning in Canada
- Participating Life Insurance
- Term Life Insurance
- Universal Life Insurance
When To Get Covered
When it comes to life insurance there really is no time that is too soon to get covered. And, this is because the younger you are, the cheaper those premiums are going to be. Not only this, but you are probably healthy right now.
If you wait until something bad happens, you will not only without a doubt face higher premiums, but you might not even be able to get covered at all.
