critical illness http://www.wisebread.com/taxonomy/term/7709/all en-US Selling Your Life Insurance Policy for Cold, Hard Cash http://www.wisebread.com/selling-your-life-insurance-policy-for-cold-hard-cash <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/selling-your-life-insurance-policy-for-cold-hard-cash" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/1136586_82991596.jpg" alt="Early Payday" title="Early Payday" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p>Depending on your age, your health, and several other factors, your current life insurance policy could be worth a lot of money to someone else. And believe it or not, people are cashing in on this new form of equity. Life insurance speculation seems morbid, but it&rsquo;s very real and can be lucrative to both parties.</p> <h3>First, What&rsquo;s This All About?</h3> <p>Well, most of us have life insurance policies. They are a monthly expense that we feel necessary because we don&rsquo;t want our loved ones to be financially burdened if we die. (See also: <a href="http://www.wisebread.com/how-and-why-to-buy-life-insurance">How (and Why) to Buy Life Insurance</a>)</p> <p>But when we reach a certain age and our children (and even grandchildren) are all grown up, the life insurance policy we have may be something we&rsquo;d like to cash in. It could also be something you want access to if you have contracted a terminal illness and have only a short amount of time to live. Whether it&rsquo;s for medical bills, travel, or just wanting to enjoy your final days with some extra money, having access to a large, lump-sum of cash is an option many people in this situation would like.</p> <p>Whatever their reasons, the option is there for many people to cash out their life insurance policies for less than they're worth. The holder of the policy gets the cash, someone else takes over the payments, and the life insurance company pays out less than face value on the policy &mdash; everyone's a winner.</p> <h3>The Numbers Nitty-Gritty</h3> <p>So if you&rsquo;re thinking about cancelling your life insurance policy, don&rsquo;t. Not just yet. Because all of the money you&rsquo;ve put into that policy over the years can be turned into a huge lump sum for you &mdash; as much as 80% of the total face value of your actual life insurance policy. If you have a $2 million policy (which is common these days, considering you need 20 times your annual salary to cover your loved ones) that equates to as much as $1.6 million. That&rsquo;s a whole lot better than just ripping up the policy and walking away.</p> <h3>Check for Accelerated Death Benefits</h3> <p>First, you can check to see if your policy allows you to collect &ldquo;accelerated death benefits.&rdquo; Not all of them do, but if your policy has that option and you have less than 24 months or less left to live, you can get a check for a huge percentage of your insurance policy&rsquo;s face value. Not only that, but you no longer have to pay premiums. It&rsquo;s also good for the insurance company because they are saving money on the full payout they&rsquo;d have to issue in less than a few years time.</p> <p>If this applies to you, or someone you know, make sure you explore this option.</p> <h3>Selling the Policy to a Third Party</h3> <p>If you discover that you have no &ldquo;accelerated death benefits&rdquo; option, you are by no means out of luck. Now you can explore an option that can be just as lucrative. The term you need to know here is &ldquo;viatical settlement.&rdquo; In a nutshell, here&rsquo;s how it works according to <a href="http://www.wdfi.org/ymm/brochures/investing/viaticals.htm">Wisconsin's Department of Financial Institutions</a>:</p> <blockquote><p>Typically, the person or viatical settlement company acquiring the life insurance policy death benefit pays the viator a discounted amount of the actual death benefit, and becomes the irrevocable beneficiary of the life insurance policy, receiving the full amount of the death benefit upon the death of the viator. Increasingly, business firms are buying life insurance policies of the terminally ill and re-selling them at marked-up prices as investments.</p> </blockquote> <p>So your life insurance policy becomes an <a href="http://www.wisebread.com/should-life-insurance-be-purchased-as-an-investment">investment</a> to someone else. You collect a chunk of money based on the face value of your policy, the third party pays your insurance premiums and, when you die, they collect the full face value of the policy.</p> <h3>The Moral Implications</h3> <p>This is where things get murky. If people are dying and want the cash, that&rsquo;s their call. But think about this for a second. With insurance, neither party has a vested interest in someone&rsquo;s death. The person with the policy (usually) doesn&rsquo;t want to die, and the insurer definitely does not want that person to die.</p> <p>But when you sell that life insurance policy, things get very different. Now there&rsquo;s an entity out there, somewhere, that will absolutely profit from the death of the person who signed over their life insurance policy. And the quicker that person dies, the better. It&rsquo;s grim, but it&rsquo;s true. What&rsquo;s more, that third party could decide they don&rsquo;t want to hang around to collect on the deal and sell it off for a slight profit. Who knows where that life insurance policy could end up.</p> <p>It&rsquo;s quite possible that shady companies that operate like mafia loan sharks could scoop up these policies. What will they do to make sure they collect on the full amounts? Would you feel safe knowing that someone out there wants you dead? After all, you may sell your policy when you&rsquo;re 75 and continue to live a good life for another 20 years. That&rsquo;s a long time for anyone to wait for a payday.</p> <p>Of course, this is taking the idea to extremes, but it&rsquo;s worth considering.</p> <p>The big question is, would you sell a $2 million life insurance policy for, say, $1 million in cash? Would you do it if you had <a href="http://www.wisebread.com/that-what-if-you-knew-you-were-going-to-die-question">just 24 months to live</a>? Would you sell it when you reached the ripe old age of 70, or even 80? Or is this money something you would rather leave to your family?</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/paul-michael">Paul Michael</a> of <a href="http://www.wisebread.com/selling-your-life-insurance-policy-for-cold-hard-cash">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-reasons-why-life-insurance-isnt-just-for-old-people">5 Reasons Why Life Insurance Isn&#039;t Just for Old People</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/critical-illness-insurance-for-wise-bloggers">Critical Illness Insurance For Wise Patients</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-women-need-life-insurance-and-what-to-do-about-it">Why Women Need Life Insurance — and What to Do About It</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-much-will-life-insurance-cost">How Much Will Life Insurance Cost?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-do-i-need-to-know-before-i-hire-a-cfp">What Do I Need to Know Before I Hire a CFP?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Insurance critical illness death life insurance windfall Fri, 04 Feb 2011 14:00:09 +0000 Paul Michael 487652 at http://www.wisebread.com Critical Illness Insurance For Wise Patients http://www.wisebread.com/critical-illness-insurance-for-wise-bloggers <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/critical-illness-insurance-for-wise-bloggers" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/illness.JPG" alt="critical illness" title="critical illness" class="imagecache imagecache-250w" width="250" height="165" /></a> </div> </div> </div> <p>There are many people who believe in insurance, and just as many who are vehemently against it. Personally I'm a believer, but I also know that there is no blanket solution for everybody, and it's very easy to be over-insured. As mentioned in my article on <a href="/how-to-choose-a-financial-planner-yes-you">How To Choose A Financial Planner</a>, it comes down to the professional (in this case an insurance agent) sitting in front of you and their genuine interest provide the best solution for you, not their pocketbook.</p> <p>Cancer, heart disease, and stroke are the three big illnesses we suffer from these days. The irony is, due to medical technology we are more likely to live from these three than die! This is good, of course, no doubt about it. But we live&hellip;at what cost? Literally?</p> <h3>True Stories of Tragedy</h3> <p>A friend of mine was set to retire. He and his wife had worked long and hard in their careers, were in their late 50s and had just bought a retirement home. However shortly into their newfound retirement, he was diagnosed with cancer. Shockingly, the wait for chemotherapy treatments at his local hospital actually exceeded his life expectancy. So off to the Mayo clinic he went, where thank goodness he received the treatments he needed and recovered fully.</p> <p>But his recovery came at a cost: his retirement savings, and ultimately his retirement. He and his wife were forced to go back to work, and are projected to have to work well into their 60s and maybe even their 70s to achieve the retirement life they once had at their fingertips.</p> <p>Another friend of mine was actually much younger: he had a heart attack at the age of 30. Due to the nature of his problem he was in and out of hospitals for over six months, and unable to continue working. Luckily after three months his disability insurance kicked in, but unfortunately the insurance only paid out 60% of his after-tax income from when he was working. This wasn't enough to pay for his new mortgage, and the full range of debts he was well on-track to paying off before the heart attack.</p> <p>The condo had to be sold through a fire-sale, and the markets had dipped such that he actually was still left owing money after the mortgage was paid off with the proceeds. And the disability insurance still couldn't cover off all his debts as well as his medical expenses. After he recovered fully from his heart attack, his finances still didn't. It will take years upon years for him to get back on track to his previously stable position.</p> <p>Are you listening (rather, reading) yet?</p> <p>Okay, let's talk about Critical Illness Insurance (CI).</p> <h3>Scary Facts:</h3> <ul> <li>75% of healthy individuals over age 40 will become critically ill.</li> <li>Every 26 seconds, an American will suffer a coronary event.</li> <li>On average, an American suffers a stroke every 45 seconds.</li> <li>Men have a one-in-two lifetime risk of developing some form of cancer. For women, the risk is one in three.</li> <li>For those suffering a critical illness prior to age 65, the probability of surviving is almost twice that of dying.</li> </ul> <p><em>Sources: 2007 Heart and Stroke Statistical Update, American Heart Association; 2007 Cancer Facts and Figures, American Cancer Society.</em></p> <h3>The Basics of Critical Illness Insurance</h3> <p>If you are diagnosed with a Critical Illness, and survive for 30 days, you are eligible to receive a cash, tax-free lump sum of money from the insurance company. (The eligibility is upon the insurance company receiving satisfactory doctor's reports detailing the illness.)</p> <p>The big three illness covered under a standard CI contract are heart disease, stroke, and cancer. Most policies also include a &quot;rider&quot; (additional clause) that provides coverage for an additional 15-20 other illnesses and accidents, including blindness, deafness, Multiple Sclerosis, Parkinson's, Alzheimer's, paralysis, and severe burns to name a few.</p> <p>Statistically speaking, you have about a 50% chance of getting one of these illnesses in your lifetime. (Just look at your chance of getting cancer: 1 in 2 or 1 in 3 depending on your gender. Now add all the other conditions and it's a scary picture.)</p> <h3>A New Thing For Insurance: Get ALL Your Money Back (Return of Premium)</h3> <p>One of the additional riders you can add to your CI policy that makes it bombproof in my eyes: If you don't make a claim (because you never got sick), you get all your money back!</p> <p>There are of course conditions to be satisfied such as the number of years you held the policy, and you will pay additional money up front for the rider. But here is a true-life example of how this policy pays:</p> <p>Joe pays $30/month for $75,000 of coverage, and has since he was 28 years old. At age 75, he will get all his money back if he doesn't make a claim. (There are other ways to structure the Return Of Premium rider, however this is one example.)</p> <p>Tomorrow, if Joe becomes critically ill, he will receive $75,000, no questions asked, and his contract with the insurance company is over and done with. He won't pay the insurance company any more money, and the insurance won't pay him again either.</p> <p>If Joe doesn't get sick, he will get all his money back at age 75. Between age 28 and 75, He'll have paid the insurance company $16,900 &mdash; a small amount in comparison to the $75,000 that would have been paid out at any time during the 47 years Joe held the policy.</p> <p>Had Joe invested the $30/month at 6% return instead of getting the CI policy, then at age 75 he would have accumulated $94,426. However, it would have taken over 43 years at 6% to have accumulated the $75,000 that would have been paid out by the insurance company at age 55 or 40 or even 29 if he got ill. So the argument of self-insurance isn't strong in this case.</p> <p>If Joe dies before age 75, he is out of luck. But if he wanted to, he could have added a Return Of Premium On Death (ROPD) rider that would give his estate all the money back too. Personally I figure that's what life insurance is for. The ROPD is more for the people who out of principal want to ensure they get their money no matter what.</p> <h3>No Two Policies Are The Same</h3> <p>There are dozens of ways to structure your Critical Illness insurance policy that I haven't delved into here. For example, you can change the age at which the Return of Premium kicks in or how it does. You can arrange to go on payment holidays if you become disabled. You can structure level policies where the rates never go up, or take a lower rate right now with the promise of an increase in 10 years.</p> <p>The list of illnesses covered and the definitions which qualify each illness also differ from policy to policy and insurance company to company. Currently there is a push to regulate the definition of illness, such that it is consistent throughout the industry.</p> <p>I can't make specific recommendations as to what you need or if you even need coverage at all. This is something to review with an insurance agent who can give you all the details you need.</p> <p>What I can say is that it seems like a winning proposition to me: Pay a little bit of money now for the promise that if you get ill and need financial assistance it will be there, and if not you get all your money back. Sure, you didn't get to invest the money in the meantime, but that's the small price you paid for the ability to protect your other investments, family, finances, and peace of mind.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/nora-dunn">Nora Dunn</a> of <a href="http://www.wisebread.com/critical-illness-insurance-for-wise-bloggers">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-choose-a-health-insurance-plan">How to Choose a Health Insurance Plan</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/health-care-reform-good-for-people-like-me">Health Care Reform: Good for People Like Me</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-examine-your-healthcare-plan-and-save">How to Examine Your Healthcare Plan and Save</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/buying-individual-dental-insurance-online-my-experience">Buying Individual Dental Insurance Online: My Experience</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-you-need-to-know-about-your-fsa">What You Need to Know About Your FSA</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Health and Beauty Insurance critical illness healthcare Wed, 29 Aug 2007 01:33:43 +0000 Nora Dunn 1058 at http://www.wisebread.com