How Does Borrowing Against Your Life Insurance Work?

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   Steve Savant

   Syndicated Financial Columnist, Host of the weekly talk show Steve Savant's Money, the Name of the Game, Scottsdale Arizona

   Borrowing money from a permanent cash value life insurance policy has a few considerations: the loan interest rate, the surrender charges and the performance of the crediting method. Policy loan costs will vary from policy to policy, i.e. zero net loans, wash loans, spread loans, direct recognition loans and participating loans. Surrender charges in the early years can be punitive resulting in reduced access to the account value. The performance of the crediting method also impacts the policy: interest rate crediting, indexed crediting and separate sub account crediting or debiting, i.e. you could lose money.

   Answered on August 11, 2013

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