Life Insurance - freeing up cash?

SyntaxTerror

Hi,
It's come to my notice over the past couple of days that it may be possible to use life insurance as a means of freeing up some cash. I'm hardly an expert on it. For example, what is meant by "cash value" and how do you calculate it? And what options might be available? What should I ask the insurance company?
I have £100,000 of cover and have been paying into it for about 15 years, I think.

Sandtree

You need to see what kind of policy you have. If it is a fairly modern term assured policy then its pure insurance and has no value.

If its an older policy or whole of life policy or such then there may be an investment part in addition to the insurance and it may be possible to get some monies. Others here know much better when such products ceased to be popular etc better than me.

dunstonh

For example, what is meant by "cash value" and how do you calculate it?

If you have an investment backed policy (which is how old fashioned policies used to be) then there will be a surrender value.  This would appear on your statements or you can ask your provider.

If you have a pure term assurance, then there is no investment element and no cash in value.

I have £100,000 of cover and have been paying into it for about 15 years, I think.

It is probably a term assurance without investment value in that case.   Investment backed plans started going obsolete in the 90s.

Aretnap

Indeed. A modern policy pays out if you die before a certain date (or, for some policies, if you are diagnosed as terminally ill). It doesn't pay out if you don't die by that date. You can't "cash it in", any more than you can cash in your home insurance if your house doesn't burn down.

So unless you have an old style investment backed policy (unlikely if you bought it 15 years ago) the only way to free up cash would be to cancel it, which would at least save you the monthly premium going forwards. However you would get no cash sum back, and you would then have no life insurance, so it's only a good idea if you no longer need the policy (or are in desparate financial straits).