6 Tips for Getting the Most Out of Your Life Insurance Policy

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Life insurance is one of the best investment decisions you can make with your money — especially if you have a family you worry about providing for in the event of your death. However, few people understand the many ways in which a good life insurance policy can benefit them and their families over the years. To get the most out of your policy, it’s important to know how it can help you and your loved ones beyond simply offering a payout when you die. Here are six tips that should help ensure you’re getting the most out of your life insurance policy.

1. Know What Happens When You Lapse

A lapse in payment — even if it occurs during the “grace” period — may drastically change your coverage situation. You may find that if you lapse, your insurance company is no longer covering you at all. It may be that they are covering you only in relation to the premiums you did pay, or they may just be covering you at an amount that is less than that you’d originally signed up for. Check on how your insurer handles lapses. You may even be able to find the information on your insurer’s website. Some will renew, but all have different approaches and procedures that have to be followed. Don’t take a chance — find out, whether you’re with AllianceFinancial.ca or another insurer.

2. Surrendering for Fast Cash

Depending on the type of policy you buy, you may have a type of insurance — universal life, whole life, and variable life — that has a built-in cash value. This option allows you to “surrender” the policy for cash. When it comes to unforeseen emergencies, the option to surrender can be incredibly helpful. Find out before you need the money if your policy will let you surrender it and keep the accrued amount.

3. Policy Loans

If you’d like to keep a hold of your policy, but you still need emergency funds, a policy loan can be a great way to line your pockets without sacrificing your entire policy. Funded through your insurance company, a policy loan goes against the value of your life insurance policy. The interest is usually pretty low, and repayment can be done on a payment plan or in a lump sum, if you prefer. If you aren’t able to repay the loan in the allotted time, your insurer will simply use the cash value of your policy to settle the loan you owe.

4. Receiving Dividends

Many life insurance companies are owned by their shareholders or policyholders. If your company falls into one of these categories, you can benefit from the company’s profits, so long as you’ve purchased a policy that receives dividends. Whether you are paid dividends in cash, as a way to continue to invest in your policy, as a means to purchase extra coverage, or as a way to reduce your monthly premiums is up to you. Bottom line? Utilizing a company that lets you earn dividends can both save and make you money.

5. Life Settlement

Another way to get cash out of your policy is to sell it to a life settlement company or individual in exchange for cash. Whoever owns the new policy will keep it in good standing by continuing to pay the premiums, and by doing so, they will also get the payout upon your death. Almost every type of life insurance is eligible for this option, although it isn’t offered to just anyone and often depends on your age and remaining life expectancy.

6. Know the Downsides

As with every bit of investing, insurance, and retirement planning, it’s essential that you know the downsides to these options and others like them. The need for fast cash can far too often cloud judgment. Guard yourself against making any rash or unduly cautious decisions regarding your policy by doing research well before you find yourself in an emergency situation. That way, you’ll be able to know your options thoroughly, which will allow you to keep a level head as you and your loved ones decide how to proceed.

Life insurance isn’t always as straightforward as it seems, and in many instances, that lack of straightforwardness can be of great benefit to you, provided you know the ins and outs of your options and have chosen a good insurer.