Can You Borrow Money from A Whole Life Insurance Policy?

happy family looking for insuranceA whole life insurance policy provides important financial advantages. You can use a policy to save money for retirement, but you can also borrow money against the policy’s total value. These options make whole life insurance an important investment, every family should consider.

Cash value

When you pay whole life insurance premiums, a part of the money goes to a separate account attached to the policy. The agency invests the money from your policy’s account into a stable fund. You do not have control over the investment; instead, you are guaranteed a fixed rate of return.

The policy thus builds cash value at a fixed rate every month/year. The accumulated amount is saved into a policy’s account from which you can withdraw money, tax free, but under certain conditions.

Borrowing money from the plan

An active whole life insurance policy gives you the possibility of borrowing money against the policy’s cash value. The maximum amount you can borrow is set by the agency, but in most cases it cannot exceed the guaranteed death benefit.

The interest rates are generally low and sometimes it is more advantageous to borrow from your policy than from a bank.

What happens if you cannot pay the debt?

If you cannot pay the debt, the agency will deduct the loan from your policy’s death benefit. Of course, you will still have to pay the premiums. If you pass away without paying the debt, your beneficiaries will receive a lower coverage as the agency will deduct the loan from the proceedings.

In conclusion, you should be careful when borrowing money from your policy. Although there is no dead line for repaying the loan, your beneficiaries may suffer financial loss if you pass away without covering the debt.

If you need more information, do not hesitate to read our website. We do not sell coverage, but we can help you find cheap life insurance by providing quotes and offers from top agencies near you!