Expert Q&A

How do I take out a loan on my life insurance policy?

How do I take out a loan on my life insurance policy? What are the pros and cons of doing so?

Related Topics: Life and Disability Insurance
Related Tags: Life Insurance, Claims, Loan
Daniel Joss
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By Daniel Joss - FJY Financial
Answered over 3 years ago

Depending upon your policy, it may not be allowed. Read the policy and ask your insurance agent or company rep. It isn’t recommended as there are better sources of cash available.

David Tirpak, CLTC, CASL®
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By David Tirpak, CLTC, CASL® - The Tirpak Agency
Answered over 3 years ago

First of course, you need to determine the cash value within your policy. Contact customer service (the telephone number should appear on your bill or statement) or call your agent. They can determine the cash value and loan amount available. Obviously, if you have a term life policy there is no cash value. Sometimes people find that borrowing on their insurance policy is a favorable way to obtain short-term funds without risking a hit on their credit report. Keep in mind that the amount that you borrow plus accumulated interest will be deducted from your death benefit should you pass away prior to repayment.

Dennis Cherenkov
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By Dennis Cherenkov - Primerica Financial Services
Answered over 5 years ago

In my opinion there are no pros to taking a loan on your cash value in your life insurance policy. As a matter-of-fact your probably better off cancelling that policy after getting a good term life policy in place and then investing that cash value money in a good mutual fund.

Keep in mind the cash value in that policy is YOUR money why would you take your money and pay interest to someone else? Cash value life insurance is a rip-off for many reasons, and that is one of them.

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