How Much Can I Borrow From My Life Insurance Policy?
Permanent life insurance policies, such as whole life and universal life insurance, have a cash value account that builds up over time. This cash value can be used to borrow money from the policy, which can be used for any purpose. However, there are a few important things to keep in mind when considering borrowing against your life insurance policy.
|The maximum amount you can borrow is typically up to 90% of the policy’s cash value|
|You can only borrow against a permanent life insurance policy with a cash value account, not a term life insurance policy|
|If you don’t pay back the loan with interest, it can reduce the policy’s cash value and death benefit, and may cause the policy to lapse|
|If you pass away while owing money on a life insurance loan, the loan amount plus any interest owed will be subtracted from the death benefit your beneficiaries receive|
It’s important to understand the specific rules and guidelines for borrowing against your life insurance policy, as they can vary by insurance company and policy type. However, in general, you can borrow up to 90% of the policy’s cash value with a permanent life insurance policy, as long as there is enough cash value built up to cover the loan amount. It’s also important to note that borrowing against your policy will reduce the amount of cash value and death benefit available to you, and that interest will accrue on the loan.
If you’re considering borrowing against your life insurance policy, it’s important to carefully weigh the pros and cons and ensure that you can pay back the loan with interest in a timely manner. If you’re unsure about whether borrowing against your policy is the right choice for your financial situation, consider consulting with a financial advisor or insurance agent.