Can You Borrow Against Your Life Insurance

The accumulated cash value of a life insurance policy is often a source of collateral for a loan. Life insurance loans usually carry lower interest rates than traditional personal loans and credit cards, and the insurance company typically does not need to run a credit score before issuing the loan. It is important to remember, however, that a life insurance loan will reduce the death benefit your beneficiaries receive upon your passing, and any unpaid balance plus interest may be subject to taxes. See more information on borrow against life insurance, click https://www.ascendantfinancial.ca/service/financial/borrowing-money-from-life-insurance/.

Generally, borrowing money from your life insurance is available only on permanent policies that include a cash account component. Term insurance, universal life or variable life insurance policies do not have this feature. Furthermore, the amount of time it takes for your policy to accumulate sufficient cash value for a loan can vary by policy type and provider. It may take as little as two years to a decade or more before your policy has accumulated enough cash value for you to borrow from it.

Becoming Your Own Banker

Borrowing from your life insurance policy can be a convenient and cost-effective way to access funds for short-term expenses such as a home improvement project, child's education, or unexpected medical bills. It is also a great alternative to high-interest credit card debt or other personal loans that can be costly over the long-term. In addition, since the life insurance policy is used as collateral for the loan, no other assets are at risk should you fail to pay back the borrowed amount.

Like any other loan, a life insurance loan requires you to repay the debt on a set schedule. However, you can borrow up to 90% of your policy's cash value and interest charges are generally much lower than what you would pay on a credit card or other loan. Additionally, you can generally pay the loan off at any time without causing your policy to lapse.

Whether you decide to borrow against your life insurance is a decision that should be carefully considered, and it is essential to speak with your financial advisor before making the final decision. It is also important to note that if you do not pay the loan back in a timely manner, your owed amount could exceed the total death benefit of the policy, which means that your beneficiaries will receive less than the full death benefit.

If you are interested in learning more about Can you borrow against your life insurance? please contact us. We can connect you with a licensed representative who can help walk through your options. Our team is dedicated to helping you achieve your financial goals, and we are proud to provide advice and guidance on how best to utilize your life insurance. We look forward to speaking with you!