Broker Check

How Life Insurance Saved her from Bankruptcy

| February 27, 2019

There are many reasons life insurance should be a part of just about everyone's financial planning.  The main objective is to replace lost earnings when the person that is insured passes away.  A term policy simply pays a death benefit once the insured dies; however, permanent life insurance policies offer much more.  A permanent policy can accumulate cash values, which can be used for a multitude of reasons - emergencies, education expenses and retirement income - just to name a few.  

The Problem

I recently had a policy owner who borrowed money from a financial institution to make needed repairs to her home.  Soon after, she experienced several financial hardships.  Coupled with her home improvement debt, her monthly expenses quickly exceeded her monthly income.  She reached out to her attorney and he recommended she file bankruptcy.  Very distraught, she called me to schedule a meeting.  During our visit she wanted to know if there were any alternatives to her filing bankruptcy.

The Solution

The good news was that, for several years before her financial hardships, she had purchased a permanent life insurance policy.  And since she had been paying her premiums each month, her policy had built cash value.  We were able to secure a policy loan to help her pay bills and avoid bankruptcy.  She is now repaying her policy loan on a monthly basis, rebuilding her cash value in her policy.  She chose to repay the loan so that her family would be able to cover expenses and receive a full death benefit in the event of her passing.  Just remember though, accessing the cash value of a life insurance policy will lower the death benefit and the value of the policy.  It also may require additional fees to keep the policy in place.  My client made a wise choice in repaying her loan, as it will bring the death benefit back up as she continues to make payments.  

Had my client not secured this policy, bankruptcy would have been her only option.  This just goes to say that there are a multitude of ways life insurance can serve you and your family.  Do you have life insurance?  If not, what are you waiting for?