How to Use Your Life Insurance Policy To Pay For Cancer Treatments
- June 1, 2020
- Posted by: Hidden Gem Life Solutions
- Category: Blog
Being diagnosed with cancer is a huge impediment to living a traditionally enjoyable life, but cancer patients now have the option to tap into their life insurance policies to pay for their cancer treatment costs.
If you don’t have any form of health insurance policy, a cancer diagnosis may leave you subject to extremely high-cost treatments that can potentially wipe out your entire life-savings in a matter of a few years. Furthermore, even people with health insurance coverage at the time of their diagnosis can be driven to the brink of financial ruin due to inability to work and mounting expenses that are not normally covered by medical insurance; like transportation, childcare, and important medical devices.
When your financial resources are at such extreme risk, your life insurance policy may be the key asset that you can leverage to significantly ease the financial burden.
A Life Insurance Policy Is An Investment—Use It To Win Your Fight Against Cancer
When a person buys into a life insurance policy, they are required to pay premium fees either monthly or annually to maintain ownership of the policy. If the policyholder meets an untimely death, the insurance company that administered the life insurance policy will pay the beneficiaries listed in the policy a set amount of money as specified in the policy prior to the policyholder’s death. There are two types of life insurance, and each one has its own benefits.
- Term Insurance – When you purchase a term insurance policy, you have bought life insurance that covers you for a set period of time that will expire at a date designated in the original contract. If you are still alive at the date of this policy’s expiration, your investment is essentially lost and you will need to purchase a new life insurance policy. Some term life insurance policies can be converted to Permanent life insurance policies, but often only occurs under very specific circumstances and with restrictive conditions. Term life insurance policies have no savings or investment value.
- Permanent Insurance – Also referred to as Universal or Whole Life Insurance, permanent insurance is insurance that never expires. These policies are generally purchased using a large initial lump sum or several comparably large installments, but because these policies last forever, the expense is well worth it. Permanent life insurance policies almost always offer policyholders several interest-bearing savings and investment options that are tied to the policy’s value.
Life Insurance Rider Benefits
Most life insurance providers will also allow policyholders some flexibility in regard to the basic conditions, requirements, and restrictions within the contract, but insurance “riders” offer you a chance to customize your life insurance policy. Drawing upon rider benefits can be an essential aspect of successfully using your life insurance to afford cancer treatment. If you have been diagnosed with cancer and currently own a life insurance policy, check your paperwork immediately to determine whether you are eligible for either of the following riders:
- Accelerated Death Benefit – Accelerated death benefits allow patients to withdraw sums of cash from their insurance policy if the individual has been diagnosed with a life threatening condition. This rider comes in several different forms, each with varying conditions, restrictions, costs, and payment options. Most life insurance policies incorporate some form of this rider, but even if your policy didn’t originally have an accelerated death benefit rider included, it may be possible to add this benefit to your life insurance policy at a later date. Qualifying for most accelerated death benefits requires an individual to meet some or all of the following conditions.
- Being diagnosed with a terminal illness by a qualified medical professional who can provide reasonable documentation proving the seriousness of the illness.
- Being diagnosed with an illness that has been deemed “critical” by the institution which administered your life insurance policy. Cancer usually falls on this list, so patients undergoing treatment for cancer don’t have to worry much about being eligible to tap into their accelerated death benefit.
- You require permanent residence at a long term care facility.
- Chronic illness has caused you to lose the capability of performing at least two core daily activities of living, such as eating, bathing, dressing, and toileting.
- Long-Term Care Rider – This rider is designed to provide long-term care coverage to individuals who have lost the ability to care for themselves without assistance. The rider has less conditions than accelerated death benefits, and usually kicks in once a qualified medical professional has determined that you have met the criteria of not being able to get dressed, get out of the bed, feed yourself, or use the bathroom without help.
Other important notes to consider is that policyholders will not be required to pay back the cash benefit if they manage to recover from the illness, but it will be deducted from the total death benefit if you choose to maintain your policy. Accelerated death benefits are also non-taxable. As you can see, leveraging these riders when diagnosed with cancer is a highly effective method of leveraging your life insurance policy to battle against malignant cancer.
Taking Loans From Your Life Insurance Policy
Another option that some cancer patients use to finance their treatment is taking out a loan that is taken from the cash value of your insurance policy. As you have continually paid into your life insurance policy, a portion of your premium payments have been put into a separate account that has built up cash value over time. The money being borrowed is taken from this sum, meaning that there are many advantages to borrowing against your life insurance policy to afford cancer treatment, but also a few disadvantages.
- Advantages – Taking a loan from your life insurance policy can be extremely useful in emergency financial crisis. Because it is effectively borrowing money from yourself, taking out a loan against your life insurance policy requires no credit check, has lower interest rates, and they don’t often have stringent repayment schedules that must be adhered to.
- Disadvantages – Taking a loan from your life insurance policy is not without consequences, though. Taking this loan for your policy reduces your death benefit, and if you happen to pass away before paying back the loan, it may leave your family unable to afford your final expenses. Another risk of life insurance policy loans is the chance of your insurance policy lapsing if you are unable to pay down the deficit before the total value of your loan and interest exceeds your policy’s total cash value.
Borrowing from your life insurance policy’s cash value may be a good idea when you are in a pinch, but the risks must be weighed appropriately before you can make the decision. If you are concerned that your family may need your entire death benefit, be careful with life insurance loans and be sure to pay them back as quickly as possible. Tapping into this option can save your life in the wake of a cancer diagnosis, so consider whether it is the right choice for you and your family.
Viatical & Life Settlements
Viatical and life settlements refer to the process of selling your life insurance policy in full to third party buyers as a means of gaining emergency income that can then be used to afford cancer treatment. The payout is usually a lump sum of cash that has variable tax implications. For example, if you have a $250,000 life insurance policy, you may be qualified to receive a $150,000 lump sum from a company willing to purchase your policy.
The process of selling your life insurance policy is often rather simple, but you must contact someone who is experienced in valuation of life insurance policies to ensure that you get the best rate for your policy. Though they are very similar, the key difference between viatical and life settlements is that viatical settlements almost always require the original policyholder to have a significantly shortened life expectancy due to a disease, while a life settlement, in contrast, does not require a limited life expectancy.
The amount of money that you can expect to receive from your life insurance policy is based on the age of the policy, your current age, your current health status, the type of life insurance you currently hold, the premium you pay, the quality of your insurance provider, the state you reside in, and the total amount of your death benefit. Hidden Gem LS specializes in helping patients balance the financial side of fighting a cancer diagnosis. They can help you understand exactly how you can benefit from selling your life insurance policy and they work hard to make sure that you receive as much money as possible in exchange for your life insurance policy.
Surrender of Policy
Most life insurance providers will allow policyholders to surrender their policy back to them in exchange for cash, ending their policy. Because this option often only offers a small fraction of the total value of the insurance policy, it is rarely the best course of action. Surrender or termination of your life insurance policy should only be considered if there is no way to sell your policy for an amount greater than the cash surrender value. Therefore, the above methods of using your life insurance policy to pay for cancer treatment should be explored and exhausted completely before considering voluntarily surrendering your life insurance policy. Fortunately, if you realize that surrendering your policy was a poor decision, many states have laws that allow former policyholders to change their mind and reclaim their policy within 3 months of the surrender.
Life insurance policyholders don’t always understand the true value that is stored within their policies. When you recognize your life insurance policy as an investment with the power to provide life-saving financial support, your policy can be used to gain the upper hand against a cancer diagnosis. Before giving into the financial burden brought on by cancer treatment, contact Hidden Gem LS for more information on how you can leverage your life insurance policy to subdue your cancer.