If you’re planning for the future, chances are you’ve considered taking out life insurance – and that’s a great idea as it can provides a financial safety net for your loved ones. However, you may wonder if you can cash out your life insurance policy before you pass away. The short answer is yes, it’s possibly – but only if you’ve been diagnosed with a terminal illness.

The Terminal Illness Benefit

Most life insurers have a clause that permits an early payout in the face of terminal illness. As an example, if you have life cover with MiWayLife, you’ll be entitled to our Terminal Illness Benefit. This means that, if the main life insured is diagnosed with a terminal illness and is likely to pass away within a year, they may opt to immediately claim 50% or 100% of their life cover amount, subject to a specialist confirming the prognosis.

Once you’ve received your payout, you can do with it what you wish – be it to cover unexpected medical expenses or make plans to ensure your loved ones are taken care of. If you choose to use 100% of your cover, your policy will be closed. However, should you recover, you can always open a new policy.

A Bit About Borrowing

 

Naturally, nobody wants to have to claim on their life insurance policy while they’re still alive but there is another way that having one can be useful prior to our passing – you can use it as surety against a home loan. Typically, any lender wants to be assured that borrowers can pay off their loan, even if they had to pass away. When you have life insurance in place, you're showing lenders that you’ve made a plan to ensure your loan can be paid up even in the event of your death.

The Bottom Line

 

While you cannot cash out your life insurance policy before you pass away, you can make a claim if you're diagnosed with a terminal illness. You can also use your policy as surety to show lenders that you’re financially responsible and that your repayment is guaranteed.