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Tap into life insurance for terminal illness

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Life insurance is generally thought of as a way to take care of your heirs. But it can also be a source of cash for you if you need to cover expenses associated with a terminal illness.

It's not uncommon for critically ill people to allow policies to lapse because the premiums are a burden. But check your policy. It's possible that years ago you signed up for a waiver-of-premium rider, which means the insurance company covers your premium if you're disabled and unable to work. Or see if you can use part of your policy's cash value to cover premiums.It may also be worthwhile to check your credit-card statements and auto or home-equity loan papers to see whether you've been paying for credit disability or credit life insurance. If you have credit disability, notify the card issuer when you're eligible for benefits, which would cover the mini-mum payments.

In the case of catastrophic medical expenses, a loan or an early payout from a life insurance policy can be a godsend. You've always been able to borrow against a cash-value policy on which you'd been paying a premium for years. Now you have other options as well:

- ACCELERATED BENEFITS. Both cash-value and term policies often carry accelerated death benefits, meaning the company will pay a terminally ill patient as much as 90 percent of the policy's face value now instead of the full benefit at death.

- VIATICAL SETTLEMENTS. Whether you have cash-value or term insurance, if you have a life expectancy of less than two to three years, you may be able to sell your policy for a percentage of the face value, using what's called a viatical settlement. Payouts typically range from 50 percent to 75 percent, says Deborah Rhoades, owner of Viatical Clearing House Inc. in Loveland, Ohio. The buyer keeps up the premium and collects the benefits at the individual's death.

Payouts from both viatical settlements and accelerated death bene-fits are tax-free if your life expectancy is less than two years and if the viatical company is licensed in your state.