Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
Only permanent insurance policies have cash value. These policies have either guaranteed cash values in the case of whole life policies or they can have values that fluctuate as is the case with universal life. The guaranteed cash values are published in the insurance policy and can be relied upon. You can borrow against your life insurance policy when there is sufficient cash value. The policy will stipulate when that can be done.
President, Lane Independent Agency, Southern California
As soon as you have accumulated some equity in your permanent life insurance policy, you may borrow against it. I would suggest you wait, allowing it to grow. This is a bank, yes, but the more it accumulates, the more you have for later, when you may need it more, such as for retirement. But permanent life insurance does give you this benefit which is lacking in term life insurance. Thank you. GARY LANE
President, The Firm of Steven H. Kobrin, LUTCF, 6-05 Saddle River Rd #103, Fair Lawn, NJ 07410
Depending on the type of product, and on the contract, you could do so after one month, or perhaps after one year.
But the most important consideration is this: you should borrow from your life insurance policy when you’re prepared to make a reduced benefit available to the beneficiary. This is because the loan (plus interest) will be taken off the top of the death benefit, should a claim have to be paid while it is still outstanding.
That could very well short-change your family or business with regards to the cash that they need.
The moral of the story: never borrow from your life insurance until you’re ready to make the trade off in death benefit.
The short answer is once you have accumulated enough cash to borrow from, but there is much more to it. First, you must have a cash value or permanent life insurance policy such as a whole life or universal life insurance policy in order to borrow funds. If you purchase your coverage at target premium, in the first 5 to 7 years all of your premium dollars will most likely fund your life portion of the policy. This means cash value really begins to accumulate significantly in the following years. There is a limit to the amount of cash that can be borrowed and leave the policy intact, so the death benefit will be paid at your death. I recommend sitting down with your agent to discuss your options before withdrawing cash from your cash value life insurance policy.
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But the most important consideration is this: you should borrow from your life insurance policy when you’re prepared to make a reduced benefit available to the beneficiary. This is because the loan (plus interest) will be taken off the top of the death benefit, should a claim have to be paid while it is still outstanding.
That could very well short-change your family or business with regards to the cash that they need.
The moral of the story: never borrow from your life insurance until you’re ready to make the trade off in death benefit.