Legal Definitions - life insurance avails

Life Insurance Avails

Life insurance avails refer to any financial value or benefit an owner receives from a life insurance policy during their lifetime, distinct from the death benefit paid to beneficiaries upon the insured's passing. These are essentially the "living benefits" or accessible wealth accumulated within certain types of life insurance policies, such as whole life or universal life policies, which build cash value over time.

For legal purposes, particularly in situations like bankruptcy, life insurance avails are significant because many jurisdictions offer statutory protections, shielding these assets from creditors. This means that even if a policyholder faces severe financial distress, the cash value or other accessible funds within their life insurance policy might be protected from seizure by those they owe money to.

Here are some examples illustrating life insurance avails:

• Example 1: Policy Loan
  Sarah owns a whole life insurance policy that has built up a substantial cash value over many years. She needs funds to cover an unexpected home repair but doesn't want to sell investments or take out a traditional bank loan. She decides to take a loan directly from her insurance company, using her policy's cash value as collateral. The money Sarah receives from this policy loan is considered a "life insurance avail." She is accessing the accumulated value of her policy during her lifetime, rather than waiting for the death benefit. This loan is a direct financial benefit derived from the policy itself.
• Example 2: Cash Withdrawal from Policy Value
  Mark has a universal life insurance policy that has accumulated significant cash value. He decides to withdraw a portion of this cash value to help pay for his child's college tuition. He doesn't intend to repay this amount, understanding it will reduce the policy's death benefit. The funds Mark withdraws from his policy's cash value are "life insurance avails." He is directly accessing the policy's accumulated financial worth for a current need, illustrating a benefit received by the policy owner while still alive, separate from the ultimate payout to beneficiaries.
• Example 3: Cash Dividends from a Participating Policy
  Emily holds a participating whole life insurance policy, which means it's eligible to receive dividends from the insurance company's profits. Each year, she chooses to receive her dividends as a direct cash payment rather than using them to purchase additional coverage or reduce her premiums. The cash dividends Emily receives annually are "life insurance avails." These payments represent a financial benefit distributed to her as the policy owner, derived from the policy's performance, and are received during her lifetime, distinct from the death benefit.