Cashing In On Globe Life Insurance: A Step-By-Step Guide

If you're facing financial hardship, you might be considering cashing in your Globe Life Insurance policy. While this can be a good way to get your hands on extra cash, it's important to understand the implications and potential drawbacks. There are a few different ways to cash in your policy, each with its own pros and cons, so it's worth doing your research and consulting a professional tax advisor and your insurance agent before making any decisions.

Borrowing from the cash value

Eligibility

To be eligible to borrow from your policy's cash value, you must meet the minimum cash value requirement set by your insurer. This means that you will need to have accumulated a certain amount of cash value in your policy before you can borrow against it. The time it takes to reach this requirement will depend on the specifics of your policy and how long you have had it.

Benefits

Drawbacks

However, there are also some drawbacks to consider before borrowing from your policy's cash value. If you are unable to repay the full amount of the loan, you may face equity surrender, and your policy could be at risk. Additionally, failing to repay the loan may result in a reduced death benefit for your beneficiary. Therefore, it is important to carefully consider the potential impact on your coverage, benefits, and premium schedule before borrowing money from your life insurance policy.

Repayment

When you borrow against the cash value of your life insurance policy, you are not required to make regular monthly payments. However, it is crucial to repay the full loan amount on time to avoid negative consequences. The insurance company will use the benefit as collateral, and if you do not repay the loan plus interest in full, the company will deduct the outstanding amount from the policy benefit. Ultimately, the decision to borrow from the cash value of your Globe Life Insurance policy should be made after careful consideration and consultation with a financial professional.

Cash value withdrawals

If you need quick access to cash but don't want to give up your coverage or ownership, you can consider withdrawing the cash value of your whole life insurance policy. This option is typically best for those who need immediate cash but want to maintain their insurance. The amount you can withdraw depends on your specific policy and provider, but it is usually less than a policy loan.

Withdrawing the cash value will reduce or deplete the available cash value and lower your death benefit. There may also be potential tax implications, so it is important to consult with a professional tax advisor before making any withdrawals.

Compared to borrowing against the cash value, withdrawing it entirely eliminates the need for repayment. However, it is important to consider the drawbacks, such as modified endowment contracts and a reduced death benefit amount.

If you are considering a cash value withdrawal, carefully review your policy and consult with a financial advisor to understand the specific implications for your situation.

Additionally, it is worth noting that the cash value of a whole life insurance policy is funded by a portion of the premiums you pay. This value is noted on your insurance statements and accumulates over time. When you make a withdrawal, you are accessing this accumulated cash value, which may be less than the total amount you have paid in premiums.

Surrendering your policy

To fully understand the implications of surrendering your policy, it is recommended that you consult with tax professionals and your licensed insurance agent. They can provide you with an accurate analysis of your situation and help you determine if this is the best course of action for your specific needs.

When you surrender your policy, you are essentially cancelling it and receiving the cash value in return. This means that you will no longer have coverage if you pass away, so it's important to carefully consider your need for life insurance before making this decision.

Life insurance settlements

The policyholder (seller) receives an immediate payment from the third party offering the settlement. The amount received is a lump-sum payment that depends on factors such as the policyholder's age, health, and the policy's terms and conditions. The payment is generally more than the policy's cash surrender value but less than the net death benefit.

It's important to note that the buyer of the policy agrees to pay any additional premiums required to support the cost of the policy for as long as the original policyholder lives. In exchange, the buyer will receive the death benefit when the policyholder dies.

Factors to Consider

There are several factors to consider when deciding whether to sell your life insurance policy through a life settlement:

• Ongoing Life Insurance Needs: If you're considering buying a new policy with the proceeds of the life settlement, you may have to pay higher premiums due to your age or changes in your health status.
• Less Costly Alternatives: If you need cash, there may be alternatives to a life settlement, such as borrowing against your policy or accelerated death benefits if you have a long-term, catastrophic, or terminal illness.
• Difficulty Determining Fair Prices: It can be challenging to know if you're getting a fair price for your policy. It's recommended to shop around by contacting multiple life settlement companies or using a licensed life settlement broker.
• Impact on Your Finances: The lump-sum payment received from a life settlement may be taxable and could negatively impact your eligibility for state or federal public assistance programs such as Medicaid.
• Impact on Your Survivors: Consider the future financial needs of your survivors or beneficiaries. Even if they don't currently need the proceeds from your insurance policy, their situation may change.
• Access to Your Health Information: The buyer of your policy will likely have access to personal information about you, including your health status, and may require periodic updates about your health.

Protecting Yourself

If you decide to pursue a life settlement, it's important to take steps to protect yourself:

• Research the life settlement companies or brokers you're considering to ensure they are regulated and licensed.
• Understand your existing policy and the details of any life settlement offer you receive.
• Be aware of high-pressure sales tactics and aggressive advertising. A legitimate investment professional will provide clear answers to your questions and give you time to make an informed decision.
• Consult with a professional tax advisor and your insurance agent before making any decisions.

Alternative to cashing out: personal loans

If you're struggling financially but don't want to cash out your life insurance policy, you may want to consider applying for a personal loan. Personal loans are available from banks, credit unions, and individual lenders. They can be a quick way to get access to the money you need, and they typically come with reasonable interest rates.

Personal loans are distinct from loans against your life insurance policy in that they are not tied to your insurance and do not impact your coverage. They also do not come with the risk of reducing the death benefit for your beneficiaries.

However, it's important to consult a financial advisor or accountant before taking out a personal loan to ensure it's the best option for your specific situation. They can help you understand the potential financial implications and explore other alternatives.

Personal loans may be a better option if you want to avoid the risks associated with cashing out your life insurance policy, such as reduced coverage, higher tax liabilities, and lower payouts to beneficiaries.

It's also worth noting that there are other alternatives to consider, such as borrowing against your 401(k) plan, taking out a home equity loan, or even selling your insurance policy if allowed. Each option has its own pros and cons, so it's essential to review them carefully before making a decision.

Frequently asked questions