Difference between revisions of "Borrow From Your Life Insurance Policy"
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#** Variable Life Insurance. Most of your premium is invested in one or more separate investment accounts, such as stocks, bonds and mutual funds. The interest that your accounts earn increases your policy's cash value. | #** Variable Life Insurance. Most of your premium is invested in one or more separate investment accounts, such as stocks, bonds and mutual funds. The interest that your accounts earn increases your policy's cash value. | ||
#** Variable Universal Life Insurance. Gives policyholders the option to invest, as well as easily change the insurance coverage amount. | #** Variable Universal Life Insurance. Gives policyholders the option to invest, as well as easily change the insurance coverage amount. | ||
| − | #* Term Life Insurance. Pays the face amount of the policy at death, and only provides protection for a set term period (normally 30 years maximum). Does not build cash value.<ref name="rf1"> | + | #* Term Life Insurance. Pays the face amount of the policy at death, and only provides protection for a set term period (normally 30 years maximum). Does not build cash value.<ref name="rf1">https://www.investopedia.com/insurance-4427716</ref> |
#Find out if your particular policy permits you to take a loan. Take a look at your policy to check if there’s a loan provision. You can also contact your agent for this information. For the most part, you can borrow against a permanent life insurance policy, since it has a cash surrender value.<ref name="rf2"> http://www.investopedia.com/ask/answers/205.asp</ref> As for term life policies, these are not loan sources since they don’t have a cash value that can be borrowed.<ref name="rf3">http://thelawdictionary.org/article/can-you-borrow-against-a-term-life-insurance-policy/</ref> | #Find out if your particular policy permits you to take a loan. Take a look at your policy to check if there’s a loan provision. You can also contact your agent for this information. For the most part, you can borrow against a permanent life insurance policy, since it has a cash surrender value.<ref name="rf2"> http://www.investopedia.com/ask/answers/205.asp</ref> As for term life policies, these are not loan sources since they don’t have a cash value that can be borrowed.<ref name="rf3">http://thelawdictionary.org/article/can-you-borrow-against-a-term-life-insurance-policy/</ref> | ||
#* Only the owner of the permanent life insurance policy can borrow from it, not the insured or beneficiaries, unless they are also the owner. | #* Only the owner of the permanent life insurance policy can borrow from it, not the insured or beneficiaries, unless they are also the owner. | ||
#Verify that your policy has enough cash value available for the loan. Check on your insurance company’s website or with your agent to find out the cash value of your policy. You can typically borrow up to the cash value you've accumulated in the account, but guidelines may differ from one company to the next.<ref name="rf4"> http://www.bankrate.com/finance/insurance/are-life-insurance-loans-a-bad-idea-2.aspx</ref> Note that cash value grows slowly at first, so you may have to own the policy for a while (sometimes as long as ten years) before you can borrow against it.<ref name="rf5">http://www.investopedia.com/articles/personal-finance/121914/understanding-life-insurance-loans.asp</ref> | #Verify that your policy has enough cash value available for the loan. Check on your insurance company’s website or with your agent to find out the cash value of your policy. You can typically borrow up to the cash value you've accumulated in the account, but guidelines may differ from one company to the next.<ref name="rf4"> http://www.bankrate.com/finance/insurance/are-life-insurance-loans-a-bad-idea-2.aspx</ref> Note that cash value grows slowly at first, so you may have to own the policy for a while (sometimes as long as ten years) before you can borrow against it.<ref name="rf5">http://www.investopedia.com/articles/personal-finance/121914/understanding-life-insurance-loans.asp</ref> | ||
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=== Deciding Whether to Take the Loan === | === Deciding Whether to Take the Loan === | ||
#Weigh the benefits of a life insurance loan versus a conventional loan. There are several reasons a loan against your insurance policy may prove to be a better deal than a standard bank loan. Some of these are: | #Weigh the benefits of a life insurance loan versus a conventional loan. There are several reasons a loan against your insurance policy may prove to be a better deal than a standard bank loan. Some of these are: | ||
