Short answer: You simply tell the insurer that you want to take a out a loan on your policy. The company will then issue you a check in the amount you request up to the allowed maximum that insurer allows.
The rest of the story: Legally you are not required to pay back the loan. However, the insurance company is charging you interest on the loan - most charge 8%. Over time the loan and the interest can eat up the cash values and make the policy implode - or default, or lapse.
Whole Life policies are either 'include' (most policies), or 'exclude' (rare). What that means is that the cash value accumulation is either included as part of the face amount or it is excluded from the face amount. If it is excluded then the loan will not adversely affect the face amount death benefit; but since most whole life policies are 'include' the death benefit will be reduced by the amount of the unpaid loan and interest accumulated.
Policy loans are a great way to cover unexpected emergencies, or college tuitions, or a new home down payment; but I would not just arbitrarily borrow my cash values. That is not a good practice.
Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
To provide for continuous coverage at a level premium a whole life policy develops cash value. The owner of a policy may borrow from the company using the cash value as collateral. The company charges a percent or more above the interest guaranteed on the cash value. Any portion of the loan that is not repaid at the time of death or surrender will be subtracted from a cash settlement.
That is a great question! Whole life policies start to accumulate a cash value after the first couple of years the policy is in force. Over time, this cash value can grow to be a fairly substantial amount of money. In the event that you needed some quick cash, you can borrow from this fund, pretty much no questions asked. To do this, you just contact your agent, and ask if your cash value is great enough to cover what you want to borrow. I suggest this, because the amount borrowed can be enough over time with interest to cause your policy to become insolvent, and you are left without insurance. Your agent can help determine how much you can safely borrow (especially if you aren't really planning to repay it). They will write you a check, and you now have tax free cash in your hands to use as it's needed. Bear in mind that your death benefit will be reduced by however much your loan with interest is at the time you pass; and that if the interest on the loan exceeds a certain amount, the company will cancel your policy. But it is still the best way to get quick cash without any credit hassles. I hope that helps, thanks for asking!
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The rest of the story: Legally you are not required to pay back the loan. However, the insurance company is charging you interest on the loan - most charge 8%. Over time the loan and the interest can eat up the cash values and make the policy implode - or default, or lapse.
Whole Life policies are either 'include' (most policies), or 'exclude' (rare). What that means is that the cash value accumulation is either included as part of the face amount or it is excluded from the face amount. If it is excluded then the loan will not adversely affect the face amount death benefit; but since most whole life policies are 'include' the death benefit will be reduced by the amount of the unpaid loan and interest accumulated.
Policy loans are a great way to cover unexpected emergencies, or college tuitions, or a new home down payment; but I would not just arbitrarily borrow my cash values. That is not a good practice.