Seven things you didn’t know your policy could do!

The Little Engine That Could

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Life insurance can provide very special protections if you (the owner/Insured) lives, dies or quits (paying premiums.)

1. Life insurance could come to the rescue if you have a terminal illness.

If you are diagnosed with a terminal illness (6-18 months to live,) you may be able to tap into your policy benefits to help pay for medical bills or other immediate expenses. These "accelerated death benefits," also called "living benefits," may have been automatically included in your policy, or you may need to add them as a rider. The insurance company will require documentation and a “set-up fee” of $750-$600; allow 10%-25% distribution up to a dollar limit ($250,000) which will be treated as a loan against the death claim. Interest will accumulate at a reasonable rate from the time of distribution until the date of death.

2. You may be able to convert your term life or group life policy to a permanent life insurance policy.

Most term life and group life policies come with the ability to convert the policy into an individual permanent life insurance without evidence of medical condition.

Group Policies, depending on the state of residence, allow conversion to a “STANDARD” rate class or special policy. I find these policies unremarkable unless the terminated employee is terminally Ill. The terminated employee will have ONLY 30 DAYS to submit the documents to convert. You need to act quickly to assess the efficacy of the policy. A GOOD TRICK to buy time; submit the  conversion documents and pay the premium  monthly. You will have up to 10 days after the receipt of the conversion policy to exercise your FREE LOOK provision and obtain a full refund. Worst case would be that we shop your case subject to underwriting AND we beat the conversion deal, then you are only out 2-3 months premiums.

Term Policies, depending on the AGE of issue, will allow conversion to a permanent policy during the length of the 10,15,20,30 year rate guarantee BUT will be age limited i.e  age 60,62,65,70,75 etc. You need to check the “Declaration” page of your policy. Fax me a copy 914-428-2363 and I’ll divine the Conversion dates from the renewal dates for you.

3. You can use your permanent policy to rescue yourself from financial disaster

60 Day free look ! If you performed a SS1035 exchange from a FIXED annuity/Life Insurance to a VARIABLE Annuity/Life Insurance; you have up to 60 days from the date of delivery to FREE LOOK your policy. The proceeds are supposed to be put into the cash account during the free look period and then transferred to the equity account. You need to review the contract to determine if you get back “market value  free of surrender charge” or your “contribution free of surrender charge”. There are special rules for IRA & Qualified plans as well!

4. Your policy may pay for your long-term care

Some Insurance Companies are offering policies that can be used to pay long term care expenses.  A long term care rider must be added at the time you apply for your policy. Long-term care riders allow you to take immediate payouts to pay for your assisted-living facility or nursing home. Your death benefit is reduced by the amount you take out.

5. Waiver of Premium (W.O.P.)

If you're unable to work due to disability or serious illness will the insurance company pay your premium? By adding a "waiver of premium" rider when you buy your policy, you can ensure that you won't have to continue premium payments if you are totally disabled for six months or longer according to the terms of the Dept  of Social Security. If have a permanent policy but no W.O.P.; you can request “Automatic Premium Loan” to pay the premium from the policy cash value until the policy lapses. In the event of a prolonged disability You may want to contact us to consider exercising one of your two “NON-Forfeiture” provisions to lock in a death benefit of SELLING the Policy to a third party for cash.

6. You may be able to turn your current term policy (3-6 years old) into a More Favorable Permanent Policy with Another Company.

If you were issued a preferred rate with Company A ( EX: LIKES travel to China, Israel or Columbia)  but company B’s Preferred ( but Dislikes travel to China, Israel or Columbia)  rate was lower than consider applying with Co A and pay premiums for the term rate  for a few months than apply for a permanent policy with B. This only works with insureds seeking a policy of $100,000 or more, under age 70-65 who were subject to full underwriting.

7. You may be able to turn your current term policy into cash by selling it to a third party.

If you cannot afford your premium because you have become sick or have reached the end of your guarantee period than you can exercise your right to sell your “property” policy to a third party. There are some down sides - you no longer have the right to the benefits of your policy & your beneficiaries will not collect any death benefit, you may not be able to purchase any more policies and you have to think about someone else holding a life insurance policy on  your life. You cannot initiate a new policy with the intent of selling it to a stranger.

If you sell your policy to a third party, they are looking for an 18%-24% compound return on their interest in your policy. If the numbers work you will be offered 10-20% of the death benefit in cash. The third party will pay all future premiums.  Assuming the future premiums are reasonable and an 18%-24% IRR than that means they are expecting you to live no more than 11 years.  IF it is a good deal for the third party, it is a good deal for your relatives. My advice: speak with your family members first before you ask me to price the policy in the market for sale. It takes at least 6 months to assemble the documentation bid  and close this type of transaction.

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