How to Borrow against Life Insurance

The ability to borrow against life insurance policies is one of the biggest advantages of purchasing whole or universal life insurance. Most life insurance policies that have a cash value will allow you to borrow against that cash value for any reason. Getting access to the money is a very simple process that is generally very quick. Here are the basics of how to borrow against your life insurance policy.

Contact Life Insurance Company

In order to borrow against your life insurance policy, you will need to get in contact with your life insurance company. You can look up your policy or go online to get the number for the customer service department. They should be able to tell you the cash value of your policy at the present time. In most situations, you will be able to borrow as much as 90 percent of the cash value of your policy. If you do not need to borrow that much, leave the rest of the money in your policy. The representative may be able to handle the process for you over the phone. If not, they will send you a document that needs to be filled out.

Loan Request Form

The representative that you talk to could mail you the appropriate loan request form, fax it to you, or e-mail it to you. Some life insurance companies will have a document library on their website to download the form to your computer.

Getting the Money

Once they process the loan request, they will give you access to the money that you need. They could provide you the money through a check or they could do an automatic deposit into your bank account.

Repaying the Money

When you take out a life insurance policy loan you will have to repay it over a certain amount of time. Your life insurance company will go over the terms of the loan and the interest rate that you will have to pay. Most of the time, the interest rate is very reasonable and the repayment terms are flexible. You may not always have to make a payment if you do not want to.

Pros and Cons

There are some pros and cons that you will need to consider. One of the advantages of using a life insurance policy loan is that you can get access to cash at a very low interest rate. This process is also very quick and easy. The disadvantage of borrowing against your life insurance is that you could potentially lose the policy if you cannot repay the loan. This could put your loved ones at risk if you pass away unexpectedly.

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