While the most pressing question is how much their policies cost, many wonder if you can borrow money from a Colonial Penn policy.
The answer is yes, but it depends on your policy type. If you have a permanent life insurance policy accumulating cash value over time, you can borrow against that value.
You should understand the implications before borrowing money from your Colonial Penn life insurance policy.
When you borrow against your policy, you essentially take out a loan from the insurance company. The loan will accrue interest, and if you don’t pay it back, the amount you owe will be deducted from your death benefit.
This means that your beneficiaries will receive less money when you die.
Keep in mind that borrowing against your life insurance policy can be complicated. You must fill out an application and provide documentation, and the insurance company must approve your loan.
Additionally, the interest rates on these loans can be high, so you should consider whether other borrowing options are available before you decide to take out a loan from your life insurance policy.
Understanding Colonial Penn Life Insurance
If you are considering borrowing money from your Colonial Penn life insurance policy, you should understand what Colonial Penn Life Insurance is and the types of policies they offer.
What is Colonial Penn Life Insurance?
Colonial Penn Life Insurance Company is a Philadelphia-based insurance company that provides life insurance coverage to people aged 40 to 85. They offer two types of policies: guaranteed issue whole life insurance and simplified issue whole life insurance. Whole life insurance, also known as permanent life insurance, provides coverage for your entire life and builds cash value over time.
Types of Colonial Penn Life Insurance Policies
Colonial Penn offers whole life insurance and guaranteed acceptance life insurance policies.
Whole life insurance policies are available in coverage amounts of $10,000, $20,000, $30,000, $40,000, and $50,000. These policies build cash value over time, which you can borrow against or use to pay your premiums. The premiums for whole life insurance policies are higher than those for term life insurance policies, but the coverage lasts for your entire life, and the policy builds cash value.
Keep in mind that the cash value of a whole life insurance policy may take several years to build up, and the interest rates on policy loans can be high. Additionally, borrowing against your policy will reduce the death benefit that your beneficiaries receive.
Colonial Penn also offers various optional riders, such as accidental death benefit riders and children’s insurance riders, that can be added to your policy for an additional cost.
Borrowing Money from Colonial Penn Life Insurance
If you are a Colonial Penn Life Insurance policyholder, you may be able to borrow against the cash value of your permanent life insurance policy. This can be a convenient way to get cash when you need it without going through a credit check or providing collateral.
How to Borrow Money from Colonial Penn Life Insurance
To borrow money from your Colonial Penn life insurance policy, contact the company and request a policy loan. The amount you can borrow will depend on your policy’s cash value and any outstanding loans or interest owed. You can generally borrow up to the full cash value, but it is important to note that borrowing too much can impact your death benefit and the growth of your policy.
Repaying the Loan
When you borrow money from your Colonial Penn life insurance policy, you must repay the loan with interest. You can make regular payments or pay the loan back in full at any time. If you do not repay the loan, it will be deducted from the death benefit paid to your beneficiaries when you pass away.
Interest Rates and Fees
Colonial Penn charges interest on policy loans, depending on the policy and the amount borrowed. The interest is added to the loan balance, which can increase over time. Additionally, there may be fees associated with taking out a policy loan, such as an origination or processing fee.
Impact on Death Benefit and Cash Value
Borrowing money from your Colonial Penn life insurance policy can impact your death benefit and your policy’s cash value. The loan amount and interest will be deducted from the death benefit paid to your beneficiaries, which can reduce the amount they receive. Additionally, borrowing too much can deplete your policy’s cash value, impacting the growth and coverage of your policy over time.
Check Out: Ownership of Colonial Penn Life Insurance Company
Alternatives to Borrowing from Colonial Penn Life Insurance
If you’re considering borrowing money from your Colonial Penn life insurance policy, know you may have other options. Here are a few alternatives:
Surrendering the Policy
You can surrender your Colonial Penn life insurance policy if you no longer need it for its cash value. The cash value is the money you would receive if you canceled your policy and took the surrender value.
Taking a Partial Withdrawal
You can withdraw partially if you need money but don’t want to surrender your policy. This means you would withdraw a portion of your policy’s cash value but leave the rest of the policy intact. Remember that taking a partial withdrawal may reduce your policy’s death benefit.
Selling the Policy
If you no longer need your Colonial Penn life insurance policy and don’t want to surrender it, you may be able to sell it to a third party. This is known as a life settlement. In a life settlement, you would sell your policy to a third party for more than the cash surrender value but less than the death benefit. Remember that not all policies are eligible for a life settlement, and the process can be complex.
Before making any decisions about your Colonial Penn life insurance policy, it’s important to review your in-force illustration and understand its surrender value. You should also consider the interest rates and guarantees associated with your policy.