Cashing in a life insurance policy
Date: Wed, 07/18/2007 - 10:45
I applied for a $55k business loan through my business name. On Friday, we found out that we were approved and my wife and I started feeling good about life again..headaches subsided, we were sleeping better and we were no longer fussing back and forth.
Yesterday, we found out that we were only approved for $17.5k...the headaches were back, neither of us slept good last night and we have pretty much been at each other's throat since then.
Yes, the $17.5k is going to help, but it does not solve all of our money problems.
We needed a total of about $48k to get us out of the credit card debt we have - most of which is business related.
I was talking with my mother the other day and she told me that I needed to get with my father (they are divorced now) so that I can get my life insurance policy from him and cash that in.
I really don't know a whole lot about the policy other than it is a $25k policy and it was fully funded when I turned 25 yrs old.
I currently have no retirement savings what-so-ever, no 401k and very very little in a savings account. My wife and I see this as an opportunity to get out of debt, aside from the business loan and a few other small bills, and an opportunity to start building money in to a retirement fund.
Without doing this, I do not have any way to build my retirement and I am already 34 yrs old...a late bloomer for retirement.
Has anyone else ever done this? I have a $150k life insurance policy on myself through my work and we would check in to an additional life insurance policy once all of the dust settles.
I know this can be a risky move, but we need the money now and this would keep us from having to go in to bankruptcy.
Any thoughts on this?
I am not a big supporter of redeeming the life insurance policy
I am not a big supporter of redeeming the life insurance policy just because there are huge debts that need to be paid. Is there any other alternative by which you can arrange the money? I understand your situation and know that you don't want to file bankruptcy. If you don't see anything that is going to help out, you may have to make this move to return back to your normal life.
I suggest you to consider a debt management plan before redeeming your policy. Speak with different debt consolidation places that handle business debts and take their free quote. They will be able to combine all your debts under one payment plan. You will get a lower interest rate to pay off. There should be no problems if you have a decent paying job. If you can get this taken care of, your life insurance policy will be a big saving for your future.
One thing you may be able to do is borrow against your policy. I
One thing you may be able to do is borrow against your policy. It's similar to borrowing against your 401k, but cheaper and without penalties.
Your best bet would be to not to cash out or borrow, but I can understand that sometimes you do what you have to do. I hope things work out for you, good luck.
Cashing in life policy
before you cash it in - check with a tax advisor. You will owe taxes on some of the money b/c it grew tax-deferred. There also may be early withdrawal penalties - you can verify this through the insurance company.
