Is Life Insurance A Liquid Asset?

  1. 125 POINTS
    That's a great question! By definition, a liquid asset is one that you can readily obtain, and move. Your life insurance, especially if it is a term policy, does not fit that description. Term insurance has no value unless you pass away during the term, and you can't use it if you wanted too, then. Whole life does have a portion of it that can be used for cash, but again, it takes years to develop a sizable amount, and the big benefit does not pay out until you have passed. There are companies out there that will buy your insurance, for a discounted cash sum, but even then that would not fit the description, or be a wise financial move. Thanks for asking!
    Answered on June 3, 2014
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  2. 125 POINTS
    A liquid asset is property which you can easily and immediately dispose of for cash. Such as a Savings Bond or a Treasury Bill (loss may occur). With life insurance, you can only dispose of it, if it is permanent not temporary (term) insurance, for cash. And then if you do dispose of it, you will have to pay tax on anything over the basic cost. It pay off, and pays off in dramatically large amounts, only if you hold it until death. A way to avoid the tax problem and to get immediate cash, is to borrow against permanent insurance for IMMEDIATE CASH. This would make the policy a liquid asset under these circumstances, and tax free to boot. Thank you. GARY LANE.
    Answered on June 3, 2014
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  3. 21750 POINTS
    Jim Winkler
    CEO/Owner, Winkler Financial Group, Houston, Texas
    That is a great question! Technically speaking, no, it is not. A liquid asset by definition is one that is easily moved, like cash, checking or savings accounts. Something like an unrevokable trust, annuity, or life insurance policy isn't, because you cannot readily get your cash. In the case of life insurance, the big payout doesn't come until after you've passed, when you can't use it. There is a portion of it, assuming you've a whole life policy, but that is considered a loan, and not free cash. Hope that helps!
    Answered on June 5, 2014
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