For example, maybe you or your spouse had the policy to protect the children when they were younger in case anything happened to you. Now the kids are grown and you no longer need the policy. You might be able to convert the cash value to a stream of tax-efficient income.

Heres a hypothetical example so that you can understand the potential benefit.

Mrs. Smith has a life insurance policy she obtained in 1975 at age 35. She has paid premiums for 30 years and has accumulated a cash value of $10,000. Now, at age 65, she no longer has a need for insurance coverage as her children are grown, but she does have a need for income.

Depending on the type of policy and when it was established, she may receive most of the income tax-free. She can convert it to a policy that pays out each month to her bank so she can take advantage of years of paying into the policy. She can take additional amounts from the principal, possibly tax-free, and at her death, her beneficiaries will receive the greater of the cash value or the death benefit, also tax-free.

Consider these other alternatives for a life insurance policy you no longer need:

Surrender it for a lump sum payment (the surrender value) or convert it to tax-efficient monthly income. You may also borrow against the cash value of the policy and or assign it as collateral for a loan.

To get the details on income or lump sums you could obtain, contact your financial professional with the latest statement on your life policy. They will get you a quote of the option that can bring the highest value and tax consequences.