If your loved one has a life insurance policy, he probably purchased it long ago, thinking to provide support to his family after his death. But a life insurance policy can also provide financial support now, if that’s when the money would be most helpful. To cash out a policy, ask your life insurance company about “accelerated” or “living” benefits. Commonly, the company that originally issued the policy buys it back for 50 to 75 percent of its face value. The amount is decided based on the policy amount and monthly premiums as well as the policyholder’s age and health. Different rules may apply depending on the company and type of policy. For example, some policies can only be cashed in if the policyholder is terminally ill; others are much more flexible.
If the company that issued the policy won’t cash it in, don’t worry. Your loved one can also sell the policy to a third-party company in return for a “life settlement” or “senior settlement,” which is usually a lump sum of 50 to 75 percent of the policy’s face value. After buying the policy, the settlement company pays the premiums until the policyholder dies, at which point the company, rather than the policy’s original beneficiaries, receives the benefits. Another option, known as a “life assurance” benefit or life insurance conversion program, allows seniors to convert the benefit of a life insurance policy directly into long-term care payments. Life insurance conversion typically pays between 15 and 50 percent of the value of the policy — less than a life settlement — but is available for lesser-value policies that might not qualify for life settlement.
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