Many seniors may face unexpected emergencies and might not have financial resources to address these. In these cases, a life insurance withdrawal may be a good option.
How to withdraw funds
- Whole life insurance has a cash value balance from which policyholders many times can withdraw funds, depending on the type of policy.
- While there is no penalty for withdrawing funds, they must be paid back plus a nominal amount of interest in order to maintain the policy’s cash value and prevent a default. That means it’s critically important to know when to use the cash value of a life insurance policy to meet short-term needs.
- Discussing options for repayment and potential impacts on life insurance policies is always important.
- In some instances, if the cash value is not repaid within a given time range, it could have a negative effect and possibly cancel coverage. But in most cases, a short-term withdrawal will have no penalties and can be a great way to obtain necessary short-term funding.
- Although federal and provincial governments provide healthcare services, not all services are covered by their respective health plans. Long term care and many types of disability services are often not covered, or only have limited coverage. That leaves it up to retirees, typically on fixed incomes, to make up the additional cost.
- In such cases, withdrawing funds from a life insurance policy’s cash value can be a great idea. Ensuring good health is always important, and even more so during retirement years when the cost of care can be high. A withdrawal from a life insurance policy can assist greatly under such circumstances.
Home repairs not covered by insurance
- Many seniors own homes that wind up needing maintenance or repairs not covered by homeowners’ insurance. The problem might be a new roof, replacing a water heater, fixing a heating and cooling system or other important repair or maintenance item.
- Without those improvements and others, a home could fall into disrepair and rapidly lose its value. In such instances, it can be a good idea to withdraw funds from a life insurance policy’s cash value to ensure a home stays in top shape and maintains its maximum value.
Difficulty obtaining a low-interest loan
- Whether the issue is health care, home repairs or some other short-term expenditure, many seniors will try to obtain a low-interest loan.
- Unfortunately, living on fixed incomes can make it difficult for many to obtain good rates on such loans or to get a loan at all. In such instances, it can be a good idea to withdraw the necessary funds from a life insurance policy’s cash value.