Oct 10
Borrowing from your life insurance policy
One of the most valuable features of a permanent life insurance policy is the ability to borrow from your policy’s cash value. It’s not taxable income and it does not affect your credit report.
So how does it work? The lender (the life insurance company) will charge interest on the loan that must be paid back. This can be done either through loan repayments or if the insured person dies it will be deducted from the death benefit. The interest rate on some policies is fixed, but most are variable.
Before deciding to borrow against your policy’s cash value be sure to talk to your life insurance agent about the pros and cons. One thing to keep in mind: taking out a policy loan can have a significant impact on your policy’s performance and future dividends.
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