IT'S all about money, honey. Nothing smells as good as liquid cash when push comes to shove. Investments, jewellery, houses all have their place in life but in a crux everyone prefers their money where they can see it, touch it, feel it anytime they want to. So the smart ones go to the bank, while others rely on the good old bed to stash the cash.

Giving into this trend we now have reverse mortgage. You can now encash your house if you need to! And if your house can turn into cash, can life insurance policies be far behind?

Let us say you have a life insurance policy -- a classic endowment policy taken at age 33 for a period of 30 years. At 51, for some reason your earning capacity is diminished due to a medical condition. Now if you’re looking for a source of cash- where would you look? Naturally your life insurance. If you want to raise money on the life insurance policy that you have religiously paid premiums on, you can do a viatical.

What's a viatical?
In the last few years, a sort of reverse life insurance industry has come into being, that profits from the premature death of insured. Those with terminal illnesses or impaired health can sell their life insurance policies for more than what their policy is currently worth, but discounts the death benefits that these policies would provide.

Since this is a sale, he can get cash. For the buyer, this is a pure business transaction. The earlier the insured dies, the more the money he stands to make. This product has its origin in the AIDS epidemic in the USA. Insured people holding small policies and stuck for liquidity found a new way of getting some liquidity.

But is a viatical the only option? Not really, ideally the best would be to keep the policy in force by continuing to pay all premiums if you can afford to from a shrinking income. Otherwise you could:

a. Reduce the sum assured by making it "paid up" -- He can write to the life insurance company to make the policy paid up, thus continuing with the benefit of the policy while not having to pay fresh premia.

b. Borrow money from the insurance company -- Most life insurance companies do give loans on their policies at reasonably attractive rates. This loan need not be repaid except out of the settlement claim -- however, the interest will have to be paid regularly.

c. Borrow money from other sources -- If you are sure the loan will be repaid from the claim proceeds, in case of death.

Choosing which option is right for you, is a very individual decision. If the ill insured has no dependants, it is easy to take a decision to hawk the policy, But if he does, the decision becomes difficult. At the end of the day it’s a toss up between how much you need the cash and how much your family needs it after you. If you’re leaving behind a son who has made his own money and a daughter in law who has made your life hell, then go ahead do the viatical!

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