Should You Cash Out Your Premium Life Insurance?

This is why it can be a good idea.

Main idea

• Most people who receive an annuity life insurance receive a large sum of money at one time.
• It is important to manage that money well so that it lasts as long as you need it.

People often buy life insurance in the hope that they will never need to. But in some cases, life insurance is required. And if your family is involved in an accident, you may be receiving a large sum of money from a life insurance company.

The question is: What should you do with that cash? You can stick it in your screen cashier, which can earn some interest. Or, you can consider investing.

The last option may seem risky. But here’s why it makes sense.

You might use that money

Most people are advised to have enough life insurance to replace their salary 10 times down. So, let’s say your wife is the sole breadwinner and brings in $100,000 a year. You may be sitting on a $1 million life insurance payout.

But chances are, you won’t need all that money at once. Even if you have to pay medical bills and pay for a funeral, you may only make a small amount of that $1 million down payment. And that’s why it’s worth investing a portion of your paycheck — any money you don’t expect to need in five years or more. That way, you can grow that money to a large amount, which should, on the other hand, give you more options for paying expenses if needed.

Get help investing in your life insurance

If you have never picked up a stock or opened a investment, then saving a large amount of money is something you may not want to do alone. A better bet may be to enlist the help of a financial advisor – ideally, one that charges a fee of a percentage of your assets under management.

A financial advisor can sit down with you and help you customize an investment plan based on your needs and goals. Maybe you’re eager to get back into the workforce now that you’re the only parent living in your family, but you want to work part-time to keep up. for your children. An advisor can take that into account when choosing your investments, as well as things like your existing debt (such as mortgage in your home) and long-term goals, such as being able to give your children enough money to pay for college.

To be clear, it is not a good idea to invest money that you think you will need in a few years. Investing every dollar of your life insurance may not be the best way to go unless you have enough money to cover many years of bills.

But you may want to spend half of your life insurance, or one-third. Doing so can help ensure that you’re left with more of every income — and that your family is better protected, financially, when came an inexplicable loss.