How to borrow from your life insurance
Life insurance is often thought of as something that you simply pay and forget about. And while a "set it and forget" mentality is normally the approach to take to more conventional insurance types like home, auto and even travel, life insurance is different.
That's because, unlike those other types, some life insurance policies actually allow policyholders to access their accounts to borrow cash. That money can then be used to pay off debt, make household repairs or for any other reason the borrower wishes.
But not every type of insurance allows for this sort of withdrawal. And it often isn't immediately available. That's why it pays to do your research to find the best life insurance for your individual needs and circumstances.
If you're in the market for life insurance, or simply want to supplement the protection you already have, then reach out to an expert today. They can help you get started with a free price quote so you know exactly what to expect.
How to borrow from your life insurance
To borrow from your life insurance you'll first need to secure the right type of policy. Life insurance has a variety of policy types with term being one of the more popular ones.
However, whole life insurance policies have the cash-out option that policyholders can borrow against.
"Cash value is what some refer to as a savings-like component of a whole life insurance policy," Ethos, a life insurance provider, explains. "It grows slowly, on a tax-deferred basis, and accumulates as you pay the policy premium."
"With your authorization, the cash value can also be used to pay premiums, keeping your policy current as your income changes with age. When available, you can also borrow against this cash value for unexpected emergencies, or even to pay medical bills or go on vacation by taking a tax-free policy loan against the accumulated policy cash value."
If you think you would benefit from the cash option that whole life insurance policies provide then reach out to a life insurance expert today.
What to know when borrowing from your life insurance
While the option to borrow cash from your life insurance is an appealing one, there are considerations to account for such as:
- Time: You'll need time to build up reserves. Buying the right policy is just step one. Step two will take longer as you'll need to acquire the funds before you can borrow them. So don't expect quick access to cash.
- Cost: Whole life insurance policies, overall, tend to be more expensive than term policies, largely due to the cash-out benefit. So be prepared to pay a higher monthly fee.
- Reduced benefit: "Keep in mind that annual loan interest will be applied to any outstanding loan balance, so it's a good idea to pay it back if you can," Ethos life insurance notes. "The final death benefit will be reduced by any outstanding loans you have taken on the policy and any premium due."
The bottom line
The benefits of life insurance are substantial and multiple. And unlike many other insurances, whole life insurance policies can provide you cash if you need it. In an uneven economy that option can be particularly appealing.
Have more questions? Speak to a life insurance expert today who can help you get started.
