How to Borrow Against Your Whole Life Insurance Policy

Whole life insurance policies not only provide lifelong coverage but also build cash value over time. One of the unique features of whole life insurance is the ability to borrow against the accumulated cash value. Here’s how it works and what you should know before taking a policy loan.

What Does Borrowing Against a Whole Life Policy Mean?

When you borrow against your whole life policy, you are taking a loan from your insurer using your policy’s cash value as collateral. This can be a convenient way to access funds for emergencies, education, or other needs without liquidating your investments.

Steps to Borrow Against Your Policy

1. Check Your Policy’s Cash Value: Contact your insurer or check your policy statement to know the available cash value.
2. Submit a Loan Request: Fill out the loan application form provided by your insurer.
3. Review Terms: Understand the interest rate, repayment terms, and impact on your policy’s death benefit.
4. Receive Funds: Once approved, the loan amount is disbursed to your bank account.
5. Repay the Loan: You can repay at your convenience, but unpaid loans (plus interest) will be deducted from the death benefit.

Benefits of Policy Loans

• No credit check required
• Quick access to funds
• Flexible repayment options
• Lower interest rates compared to personal loans

Important Considerations

• Unpaid loans reduce the death benefit for your beneficiaries.
• Interest accrues on the outstanding loan amount.
• If the loan plus interest exceeds the cash value, your policy may lapse.

Conclusion

Borrowing against your whole life policy can be a smart financial move in times of need. Always review the terms and consult your insurer to make an informed decision.