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Alternatives

Life settlements* are a great option for many people who have policies that are unaffordable or unwanted. They are not the only option, however. The table below outlines the benefits and pitfalls of the other available options.

Description Pro Con
Policy loan Loan that uses the cash value of the policy as collateral. If the insured does not need that much cash, then provides access to a bit of liquidity while preserving most of the death benefit for heirs.
  • Policy loans do not provide as much liquidity as a life settlement.
  • Generally not available on term life.
Surrender the policy for the cash value Voluntarily terminate the policy in exchange for the accumulated cash value. Guaranteed funds, though life settlement can usually provide higher return.
  • Some policies charge a surrender fee.
  • Often does not provide as much money as a life settlement.
Beneficiaries pay the premium Beneficiaries take over payment of the premium. Full death benefit will be available to heirs.
  • Does not provide access to increased liquidity during insured's lifetime.
Accelerated death benefit rider Life insurance proceeds paid to a terminally ill person before his or her death. Generally, the life expectancy must be 6-12 months and the policyowner may receive 25-75% of the policy's face value. Any remainder is paid to the beneficiary after the insured passes. The insured has access to funds during their lifetime, while also leaving some death benefit for the beneficiary.
  • A viatical settlement could provide more money during the insured's lifetime.
  • Not all policies provide this benefit - check with your carrier to see if yours qualifies.