Raising cash in a hurry #10: Sell your life insurance

Update May 2009: The IRS has issued a couple of ruling recently that could affect taxation on viaticals, so check with your accountant before dipping into this market.

Yes, you did buy that life insurance for a reason and you may have family members who would desperately need the proceeds in the event of your untimely demise. But if things are getting desperate now, you may be able to turn that policy into cash. And, no, you don't have to die to do it.

If it is "whole" or "universal" life (a type of insurance you buy to last your "whole" life and your heirs get the payout even if you live to 104), you pay higher premiums, but the insurance has a "cash value" that you can tap any time. All you have to do is call your life insurance company to access the money. It won't be much if you've only had the policy a few years, but at least you won't be paying premiums anymore. This is an option that you should only take if you are still fairly young and healthy, really desperate for cash and can't afford the premiums anyway.

However, if you are elderly or terminally ill, there is another way to cash in your insurance policy that may indeed make sense for you and can net some serious dollars right away. If you've never heard of it, it sounds like a scam (and, beware, this industry has been filled with scammers). Here it is: You can sell your insurance policy to an investment company (usually through a broker), who will continue paying the premiums until you die, at which point the company will collect the benefits.