When and why should I cash in my insurance policy | AssureAsia.com

You have been paying into your life insurance policy for many years, steadily accruing bonuses, why would you decide to cash in early?

In reality, the full value for an insurance policy is typically only realised at claim time, there can be circumstances in which it makes financial sense to cash out early.


These are some common scenarios in which people decide to cash in their policy.


1.To pay down debt

When you’re paying more interest on debt than you’re earning on your investment, it might make sense to clear that debt like credit card outstanding and unsecured overdraft.


2.When there’s a requirement for cash

Some people sell their policies to help meet an upcoming financial commitment – clearing debt, helping out family, renovating the home or even purchasing a property overseas. Whatever the reasons are, these policies are often the only source of new funds available to meet these needs; any additional amount you can source is very well received.


3. To put the money to use elsewhere

Well, you are aware of the gains in property prices in recent years, so it’s not surprising some policyholders sell a policy to invest in property, or to ‘reinvest elsewhere’.


4.To settle policy debts, which you can’t repay

Policy debts sometimes accrue from loans taken out against the policy with the life company, or from not paying premiums over several years. The principal and interest debt can grow until you’re unable to repay the amount owed.

Some policyholders are unable to visualise how they could repay the growing debt the policyholder had ceased paying the policy premiums and initiated surrender, rather than waiting for the policy to lapse and become worthless in 3-4 years’ time.


5.When you’ve outgrown your policy, or no longer need insurance

If you no longer have dependents at home, and you’re mortgage-free, do you still need that life insurance policy?

Very often, many policy owners purchased their first insurance policy as a young adults in their 20s. As they bought their first home with a mortgage and have children. At this stage they would have purchase extra insurance policies for themselves and children. Now the children have grown up and have their own life insurance policies, the parents’ insurance is no longer a necessity.

Whilst those policies may still have some residual insurance value, very often policyholders say, “The house is paid off, the kids have grownup and left home, so we no longer need insurance cover. We’ve put the money to use elsewhere”.


6. To supplement retirement income

For those who wants to supplement retirement income, selling a life insurance policy can provide immediate access to funds for usage now, instead of – or perhaps in addition to – a home equity loan or reverse mortgage.


7. Instead of a Reverse Mortgage

Reverse mortgage or home equity loan are available for home-owners to access funds.There are some things to be aware of with theseloans. In some circumstances, home owners are unable to repay the mortgage instalment and are in long term unemployment or healthcare due to injury or illness.

There is no one in the family who is able to repay the mortgage instalment to keep the house. The apartment or house will be foreclosed by the bank and will leave the home owners homeless. Also reverse mortgages also incur higher interest rates – all of which makes cashing up un-needed life insurance policies an appealing and risk-free alternative source of funds for many.

Anyone can assign “sell”

Some assume that selling a life insurance policy only applies to older policyholders looking to cash in. That is not true. However it is important to note not all policies will qualify for extra premium over the cash value.

AssureAsia.com can provide a better outcome.

If you are still unsure, drop us an email and check with us how AssureAsia.com can help you get better value out from your insurance policy.