How to Use Life Insurance While Alive: 9 Ways to Get Cash Quick

“The best things in life are free
But you can give ‘em to the birds and bees
I need money; that’s what I want!”
-from Money (That’s What I Want), written by Berry Gordy and Janie Bradford.

For over 50 years, people have been singing along with the chorus, “I need money –  that’s what I want!” And for those with whole life insurance policies, there are several ways for policyholders to get “a whole lotta money” when needed. For an overview of how to use life insurance while alive to get cash when needed (a strategy that has not been lost on the top 1%), keep reading. And if you’re interested in a deep dive that explores the financial secrets of the 1%, enroll in our free webinar “Surprising Secrets From the 1% Rulebook”. 

How to Use Life Insurance While Alive to Get Cash When You Need It

1. Surrender Your Policy for its Cash Value.

Once seen as the “only” option for using life insurance while alive (if a policy was no longer wanted, needed, or affordable) many policyholders still take this option simply because they do not understand the other options available to them. This isn’t typically the option we recommend as you’ll surrender all policy benefits along with your policy… plus, you may short-change yourself.

2. Sell Your Life Insurance Policy for Cash

As we have talked about in our posts about Life Settlements, one way of using life insurance while alive to get cash when you need it is to sell your policy and the rights to your death benefit. This option has only been widely available the last few decades, and it is increasing in popularity. Selling a policy can work well for people who are very elderly and/or suffering from serious health issues, both of which increase the likelihood that there will be willing buyers. But what if you’re 50 years old and competing in marathons?

3. Withdraw Your Cash Value of a Whole Life Insurance Policy

If you are withdrawing below your “basis” (the amount you’ve paid into your policy), then you can withdraw part (or even all) of your cash value without penalties or taxes. You also don’t have to pay back what you withdraw, as it was your money to start with. This might be a preferable option to a home equity loan or borrowing from your 401(k) or IRA, as there are no penalties, taxes, or qualifying procedures. However, your cash value stops growing if you withdraw it, so you might prefer the next option if you’re considering how to use life insurance while alive to access cash.

4. Borrow Against the Cash Value on Whole Life Insurance

Typically, people borrow against their cash value by going directly to the life insurance company for the loan. Since the cash value is collateral and the company has that in its possession, this is also a fast and hassle-free method of how to use life insurance while alive (with no credit checks, pay stubs, or approval process). If the rates at your bank are better, you might be able to borrow from your bank instead, still using your cash value as collateral. (Ask your banker for more information.)

People and even financial advisors often talk about “borrowing your cash value.” But that is a misleading, inaccurate phrase. You don’t actually borrow the cash value itself (nor do you pay back interest to yourself, in spite of what you might have been told). If you’re borrowing from your insurance company, you’re leveraging your cash value by borrowing against it.

5. Borrow Against Your Death Benefit

death benefit

In some situations, you might be able to leverage your policy to borrow from a bank or a private individual, using your death benefit as collateral. As discussed under No. 1 (selling your policy), this isn’t an option unless you’re in your 80s or 90s. But depending on your situation, it might make more sense than selling your policy. And if you require the money for medical care, find out if your policy provides the following benefit…

6. Receive an Accelerated Death Benefit

Whether or not you have this option available to you will depend on what options and riders you choose when purchasing your policy. To get an insurance policy review, contact your life insurance company. They’ll be able to tell you if an accelerated death benefit is available to you. If you do, you may be able to receive a portion of the face value of the policy (the total value including the death benefit) by proving you have a qualifying diagnosis or condition.

7. Annuitize Your Policy

In contrast to borrowing against your policy, this is a non-revocable option for how to use life insurance while alive that should be used only late in life with the guidance of a professional. Most insurance companies offer this option. Not unlike a reverse mortgage, this option will allow your policy to start paying you. You would select a time period, such as 10 or 20 years, life expectancy, or life plus a certain amount to the beneficiaries. You would receive a specified amount of income each month during that time frame.

8. Take Your Dividends Out in Cash

If you’re just looking for a little extra cash to make the difference between surviving and thriving, this may be your ticket. Typically, anything realized from a dividend-paying whole life insurance policy is used to purchase paid-up additions, but instead, they can be received in tax-free cash up to your basis.

9. Set Up a Charitable Remainder Trust with your Policy

Finally, when considering how to use life insurance while alive to access cash, don’t overlook the option of charitable remainder trusts. You can use these trusts to sell a highly appreciated asset (including real estate, stocks, or a business) in a way that reduces capital gains taxes and also benefits the charity. It’s also a way for the person donating the policy to get an income stream, which comes from the charity that invests the money from the asset.

charity

For more information on this and other options, see my book Live Your Life Insurance. You can get a hard copy from Amazon or purchase it in downloadable digital ebook or audio formats at ProsperityThinkers.com.

Do you simply want to eliminate your premium payments? If you’ve had your policy for a while, it might be possible to do – while keeping your policy. Read “Stop Your Premium Payments… and KEEP Your Whole Life Policy!” to find out more.

Do you need help understanding your policy and options? We can help! For a limited time, we are offering a No-cost, No-obligation, Life Insurance Policy Review.

Whether you’re considering using life insurance while alive to get cash and want to weigh your options, or you simply want to understand the benefits of your policy, we’d love to talk with you. We use advanced analytics tools such as the whole life insurance policy cash value calculator to help you get the most out of your insurance policy. 

20 thoughts on “How to Use Life Insurance While Alive: 9 Ways to Get Cash Quick”

  1. Is there a minimum required amount to start Single Premium Policy? And if I want to borrow against a Single Premium Policy, is there a penalty taken ever time I borrow against it?

    1. Prosperity Thinkers

      Hi David, thanks for your question. A single premium policy will become what’s called a MEC, or modified endowment contract, effectively losing many of the tax benefits of an insurance policy. This doesn’t make a MEC bad, however, there might be other options better suited to what you’d like to accomplish. We’d be happy to discuss options with you, if you email us at we*****@pr****************.com.

  2. Good morning everyone,
    I’m asking about the way to save money by buying a life insurance ….. and if it is simple to get money back as loan.
    Thanks a lot

    1. Prosperity Thinkers

      Thanks for your interest, Rachid! The policy loan process is quite simple. While it takes a bit longer than going to your bank and making a withdrawal (days instead of minutes), there’s no paperwork or approval process. If you want it, then you’ve got it (so long as you have the cash value to back it up). This is just one reason why we LOVE life insurance as a savings vehicle. We’d be happy to discuss more with you if you email us at we*****@pr****************.com

  3. Jamie Isaacson

    we just had our life insurance agent call us and wants us to surrender our life policies which has additional paid up insurance and buy into one policy that would give the beneficial a better return upon death. Is this usually practice?

    1. That is rarely if ever a good idea… especially if he/she wants to switch you from whole life to some kind of IUL policy! (Nor would it make any sense to replace an old WL policy with a new one)

      Please read this, it may help shed some light: https://prosperitythinkers.com/exchange-life-insurance-policy/

  4. Yuri Batista Duarte

    I am 58 years old and would like to cash out my whole life insurance and switch to a term life insurance. How can I do it and cashing my whole at the same time.

    1. You would need to cancel your whole life policy and begin a brand new term insurance policy. Please weigh your options carefully… pricing for new policies goes up every year and you may regret giving up a permanent policy. If you wish to pause, reduce or eliminate premiums on the whole life policy due to a change in financial situation, you might have some options, depending on how long you have had the policy. See https://prosperitythinkers.com/save-a-life-insurance-policy-when-you-cant-afford-the-premiums/ for more. Hope that helps!

    1. Hi Lillie, we sell high high value whole life insurance. (We describe it as savings rather than an investment.) Email jo**@pr****************.com if you would like a quote in the form of an illustration, or if you have any questions about life insurance.

  5. Geoffrey Sadwith

    As we get older, and push past 60 or 65 – our income tends to decrease. As if we haven’t noticed! Some baby boomers, or retirees who are still working, on whatever level (which seems to be most of us, these days), still run into “age bias” in the workplace… And at the same time, a lot of things we pay into every month are increasing their cost these days… car insurance, health coverage, pharmacy items… and most importantly, life insurance premiums are going way, way up – especially if we’re “of a certain age”… like 65 or 70, for example. Clearly, seniors are being targeted by insurance companies – there’s no doubt about that!

    But it appears that we now have some real options, thankfully. By selling your life insurance, super fast financial assistance is available to seniors that have a whole life policy, convertible term life policy or a universal life policy. What they call Life Settlement (the ability to sell your life insurance) seems to be a really great way to assemble some serious cash fast, at an age when income seems to be going down. So you can now sell your life insurance policy for CASH… in a few days. If we’re over the age of 65 or 70, basically you can sell your life insurance policy which allows you to STOP paying monthly insurance premiums – that, if you’re like me, are literally going through the roof. It’s a fact, life insurance premiums keep going up. As if age bias in the workplace wasn’t bad enough — now those of us over 60 or 65 are being targeted for these unfair premium increases!

    Get this – selling a life insurance policy can pay baby boomers, seniors, retirees up to 10 times more than what we would get from an insurance company for a “surrendered” policy. Are you doing the math on this? OK. So who purchases life insurance policies? How do I know how much my policy is worth? And what are the first steps to sell my policy? From my research, besides Partners4prosperity.com, you can get all the right info on selling a life insurance policy from niche online companies like TheSimpleDollar.com or MoneyTalkNews.com, or an established life settlement company like http://www.harborlifesettlements.com who purchases life insurance policies… You want a company who has a really good rep, and who gives seniors and retirees and baby boomers a really good deal. That’s what’s important to most of us boomers.

  6. I have paid up 200,000 whole life policy. I am 74 and in pretty good health with one bout of cancer which is no longer an issue. I am trying to find a way to get some extra money now for my son who has a terminal illness and who I want to give some fun money at this time of hid life. What could I do. How do companies decide what to pay for a policy.

    1. Hi Robert, I’m sure we replied earlier, but comment disappeared in website transition, hopefully you received back then.

      First off, so sorry to hear about your son. You sound like a great father. If you are a healthy 74, you won’t be able to sell your policy right now. But you can do withdrawals or a loan against your cash value. A withdrawal will lower your death benefit as well as cash value, but you won’t need to pay it back. Best to you and yours.

  7. My mother in law is on her death bed as we speak. We want to start looking for a coffins and what not, but my husband was told that he can only borrow against her policy? We are new at this and confused. Please help

    1. Lorena, we are so sorry to hear about your situation. (And I apologize for our delay in the reply, Kim was out of town and I did not want to guess on this one.) Yes, unless there is a rider that allows you to “accelerate” the death benefit, you would be limited to borrowing against the policy. You can also always withdraw most (but not all) of the cash value, but in this case, borrowing could be a better option.

  8. I have three whole life policies on my husband…. My husband is 64 in good health but had a quadruple bypass 20 years ago. We would like to sell one policy. It will be fully paid up in 2025. How do I go about finding a buyer? And what can I expect to sell it for? Would appreciate any advice.
    Thanks,
    Deb

    1. Deb, I believe you have already received a response from Kim or Jeune, though I’m posting “just in case.” (Also, I deleted the financial specifics from your comment.) This is a common question and the answer is useful to others as well.

      As far as selling life insurance policies on the open “market” (for instance, to a company that buys them for purposes of life settlement investments), your husband is too young and healthy! Life settlement companies buy policies that insure those who are elderly (typically in their 80’s) and not healthy, but suffering from serious health issues.

      Sometimes a family member or even a private party can be found who is interested. And of course, you can always cancel for the cash value. However, you might be very interested in our article on various ways to KEEP a policy without having to keep making payments on it. There may be one or more ways that work for you in your situation!

    2. Hi! I am a licensed insurance agent and I would say to get ahold of the company that you originally purchased your policy from and they should be able to direct you along. Hope that helps.

  9. Marigail Hensley

    I have a $10.000 whole life policy which I’m trying to sell or get a loan on. It’s cash value of $2.000 is almost gone. I took this policy over for that reason so that it would not be cancelled. I own this policy on my sister who has a life threatening genetic illness and she no longer needs this policy as there are other’s in place for her. I’m either trying to sell it for $4.000 or get a loan on it in the same amount. No one wants to buy a whole life policy unless it’s $100.000 or more. Where can I go with this policy I have to get a loan or try to sell it? I’m lost.

    1. You are correct, investors and life settlement funds who purchase policies are looking for larger policies, unfortunately for your situation. Is it possible for you to simply keep the policy yourself rather than selling it? You might ask about an “automatic premium loan” that would help you pay the premiums for awhile. You could also check with a local, small bank or credit union, though most would be more likely to loan against cash value than a death benefit. You also might consider seeing if another family member would be willing to purchase it and maintain it.

Leave a Comment

Your email address will not be published. Required fields are marked *

Share this post

Facebook
Twitter
LinkedIn

Begin your journey with the Prosperity Action Pack

Get immediate access to our short ebook Your Guide to Activating Prosperity, audio recording, our summary sheet about the 7 Principles of Prosperity™, and our subscriber-only Prosperity on Purpose Round-Up. 

Just fill out this form and get access now!