Is it possible to take out a loan on a life insurance policy?

Question

Is it possible to take out a loan on a life insurance policy?

Answer 1

If it has a cash value, you can borrow up to 90% of the cash value.  

You can't borrow against the FACE value.

Answer 2

Only against the cash portion as already answered....

Jeff

Answer 3

If it has cash value, it's possible to take out a loan (the actual amount varies from company to company).  It usually unwise to do so.

Call your agent or customer service, and make sure you review an "inforce illustration" with and without the loan so you know the impact it may have on your life coverage.

Answer 4

Yes. It’s like that scene in the Christmas classic “It’s a Wonderful Life” when George Bailey asks Henry Potter for a loan. Potter asks, “What kind of security would I have, George?” Bailey replies, “I have some life insurance, a fifteen thousand dollar policy.” Potter asks, “How much is your equity in it?,” George says, “Five hundred dollars.”

A whole life or a universal life policy builds equity, known as cash value, as it matures. You can borrow that cash value and replay the policy later. George Bailey needed $8000, so he didn’t get the $500 loan.

Answer 5

If you purchased some kind of permanent whole life or universal life policy, then they usually have cash value that you can borrow against. The cash values come from the premium that is leftover after the insurance company deducts the costs associated with your death benefit.

You can usually find out the current cash value that you can borrow against on your most recent statement from the insurance company or by calling their policyholder service department.

If you die before you pay the loan back then the loan is subtracted from your death benefit. If you cancel the policy before you pay the loan back then the loan is subtracted from your cash surrender value. There may also some income tax implications if you do not pay the loans back in a certain amount of time.

Answer 6

That depends on the type of life insurance policy you have. If the life insurance is called Whole Life, Universal Life, Variable Life, Variable Universal Life, then you can borrow most of the cash value.

If it says "term", then there's nothing you can borrow since term insurance doesn't build cash value.

If you really think about it, isn't the cash value suppose to be yours in the first place? I mean, you pay your premiums and the premiums pays for the insurance and the savings. While you have access to your savings at anytime, the savings doesn't work like the bank. In order to access this savings in the life insurance policy, you have to borrow it at a 6-8% loan rate or cancel the policy and pay surrender charges. If you die someday, the insurance company keeps your savings, but at least they pay out the death benefit.

With term insurance, it doesn't build any savings. So you can save your money anywhere you want and take it out anytime without having to put it back. If you die during the term, your beneficiary gets the death benefit and family members will get your assets. If you die after the term, at least you will leave money behind for your family.