Terminal Illness: Financial Resources from Life Insurance

Amongst all the many things to deal with when facing terminal illness, whether your own or a loved one's, financial pressures can be one of the most crushing. With lost income, rising expenses and health insurance that just never seems to be enough, a financial crisis can come to overshadow a time when our attentions are elsewhere needed. Resources may further be limited by a drop in investment values, the decline of real estate values and other recent economic events.

An often overlooked resource is life insurance. There are several ways to pull benefits from a policy prior to death. Also, a spouse or other family member could use one of these strategies to ease the situation.

Cash Values can be borrowed or withdrawn. This will reduce the death benefit by the amount of the loan plus interest so long as premiums continue to be paid. Most of the time it is a simple process, requiring only a short form and signature. The check will be brought by the agent or mailed within a month, often within a week or two. For the particulars check with your agent or life insurance company.

Accelerated Death Benefits (ADB) are offered by many insurance companies as an option for the terminally ill. This rider allows the insured access to a large portion of their policy's death benefit while they are still living. The process would require the release of the insured's medical records to the insurance company. Even if there is no clause for this in your policy you should still ask your insurance company. Insurance companies benefit because they pay less than the full face value.

Viatical Settlements are another way for an insured with terminal illness to gain a portion of their policy's death benefit while still alive. Investors purchase all rights to the policy and assume the premium payments. Payouts will generally exceed seventy percent or more of the policy's death benefit. Your insurance agent may or may not be able to help you with this. Many insurance companies discourage this practice. They would prefer the policy holder use the Cash Value or Accelerated Death Benefit. Either of which will cost them a lot less money than an investor maintaining the policy until the insured passes on. Your best sources for a Viatical are financial professionals. CPAs, Certified Financial Planners and attorneys should be able to help. A viatical or life settlement broker could also assist but they may be more interested in the best commission rather than the best settlement for their client. A fee based financial professional will likely give the best service.

Life Settlements, also known as Senior Settlements, are similar to Viaticals. Life Settlements are available to those age 65 or older. A spouse or other family member could tap their own insurance policy for cash. For both types of settlements the insured should get offers from different companies. As with Viaticals, using a financial professional will be your best option.