Can You Borrow From Employer Life Insurance?

Life insurance policies provided by employers are usually term life insurance policies with no cash value, as explained by Prudential. However, other types of life insurance policies, such as universal insurance, have cash value components that can be borrowed against. Indexed universal insurance is tied to the U.S. stock market, while variable universal insurance allows policyholders to manage investment options.

Policy TypeCash ValueAdditional Information
Term Life InsuranceNo cash valueOffered as an employee benefit; benefits may only equal a year or two of salary
Universal Life InsuranceCash value separate from death benefitPermanent coverage as long as premiums are paid on time; cash value can be borrowed against, surrendered for its current value, or used to make premium payments

Group term life insurance policies are typically offered to members of specific groups, such as employees of a company or members of a labor union or association. If you leave your job, the policy will generally end about 30 days afterward. However, some policies may be portable, allowing you to change the policy into an individual one, although this option is not common. If the insurance provider wants to keep you as a customer, they may offer a deal if you decide to continue with the policy.

While you cannot borrow from a term life insurance policy offered by an employer, you may be able to borrow against the cash value of a universal life insurance policy. This can be done by surrendering the policy for its current cash value or borrowing against the cash value with interest. Remember that borrowing against the policy reduces its death benefit and can have tax consequences, so it is important to consider all options carefully before making a decision.

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