Cashing Out Insurance

How can you get the best settlement possible from your insurance policy? Some tips from the experts:

* Check with your insurer. About 10% of the nation’s insurers offer accelerated benefits on life insurance policies. For someone who has a very short time to live and wants to leave some money to dependents, this may be the best option. Even if the policy doesn’t specify an accelerated benefit option, the company may make an exception.

* Shop around. If you opt for a viatical settlement, realize that there are numerous players in the industry and that they compete with each other. The state Insurance Department will provide such a listing; call (800) 927-HELP.

* Expect an escrow account. Don’t sign over your policy unless and until the funding company agrees to put the money into an escrow account with a reliable third party to hold while the paperwork is completed.

* Beware of the tax consequences. Realize that viatical settlements--but not accelerated benefits--are currently considered taxable income by the federal government, though not by California.

* Consider the effect on government benefits. Benefits such as Medicaid or food stamps could be suspended if your assets increase.

* Seek advice. Because this is a big decision that affects both you and your heirs, you should consult a financial adviser. Your adviser may be able to structure the deal to better serve the needs of you and your family.