Woah, you say, how in the world is THAT possible? And Carrie, you weren’t dead at the time, so what gives? Are you pulling my leg?
True story- I bought my first motorcycle with the available cash value from several small life insurance policies my parents bought for me when I was a kid.
It’s all bona fide, I promise. You see, my parents bought me three policies when I was very young- all whole life policies. For those that aren’t well versed with whole life policies, here’s a brief outline of its key features:
- Premiums are usually payable for the individual’s lifetime
- As premiums are paid, a small portion of that premium is set aside and accumulates as “cash value”
- When cash value has accumulated, you can have it. No questions asked.
Did you catch that last one? Read on to see how it worked for me.
I was new to the insurance industry when I bought the motorcycle so I didn’t know about cash value of a permanent life insurance policy. I also didn’t want to take out a loan, having just graduated from college, with limited resources. So my dad suggested I check the policies. I did, and come to find out I had enough between all three policies to buy the bike free and clear. So I called the insurance company and asked them to send me a check for the available cash for all three policies.
Four days later, I had the cash and bought the bike.
Quite frankly, this is one of the best arguments I have FOR buying a whole life policy- you have a reserve of cash you can pull from at any time. Maybe you won’t go buy a motorcycle (and there will be several out there that will call me irresponsible and that’s OK), but if you have an emergency situation and need fast cash? Much, much better than a payday loan place (compare a 4% interest rate to over 100%) or begging from family or friends.
Important note: when you do request available cash value, it’s referred to as taking a loan against the amount. But unlike conventional loans, you don’t have to pay it back. Really. If it hasn’t been paid back by the time of claim, the insurance company will merely subtract it from the total policy amount for a final check amount.
My point with this post is not to tell people to get all crazy and irresponsible, but instead to showcase a feature of permanent life insurance you may not have known about. Perhaps you didn’t realize that you could do this with a permanent policy. Or perhaps you did, but you didn’t realize how easy the process can be. Yes, life insurance doesn’t always have to be morbid and dark. As you can see here, it can help while you’re still living.
(in case you’re wondering, yes, that is the color of the bike when I bought it. No, I didn’t like it. But I got a heck of a deal on the bike, so I dealt with it for a few years until I could afford a new one.)