Should I Borrow From My Life Insurance Policy

Borrowing from your life insurance policy allows a lot more flexibility in repayment. For example, when you borrow from a bank, you have monthly payments to make over a fixed term, whereas if you borrow from your life insurance policy, you can pay back as little or as much as you want at any time interval.. The answer is “yes,” though only if it’s a whole life policy with cash values and only up to the amount of the surrender or loan value. One caution: Whatever amount you borrow from the life.... Not all life insurance policies allow you to borrow against them, so you need to find out the type of policy you own. The most common types of life insurance policies are: Permanent life policies. These policies have a savings element along with the mortality coverage, and that is why you can borrow from them.. Borrowing from your life insurance policy should be a last resort when most other options for funding have been exhausted. You will only be able to borrow if you have permanent life insurance.... Life insurance policies that build cash value can be complex, but many allow the policyholder to borrow against the policy or to withdraw cash permanently (a "surrender"), or to use the cash value....

There is no cash value. Permanent life insurance (i.e. whole life or universal life) provides your beneficiary a death benefit as long as you live.  It also accumulates cash value that you withdraw.... In an emergency, borrowing from your whole life insurance policy’s cash value may be a reasonable choice. With most policies, you have to wait until you have a certain value available before you borrow. And you can probably only borrow a certain percentage of the available cash value.. If you are out of options and must access your life insurance policy, it's better to withdraw or borrow cash, versus surrendering the policy altogether. Cash-value life insurance policies such as....

Therefore, borrowing from your life insurance policy is a great alternative if you aren’t sure how long you’ll need the loan. Now, it’s typically to your benefit to pay back a policy loan in a timely manner as the interest compounds annually and the policy will lapse if the outstanding loan gets too large.. A life insurance policy loan is not taxable as income, as long as it doesn't exceed the amount paid in premiums for the policy..