Unlocking Funds: How to Borrow Against Your Life Insurance Policy

Did you know your life insurance policy can be more than just a safety net when a loved one passes away? If you have a permanent life insurance policy, you can borrow against its cash value, providing you with a quick and accessible source of funds for major expenses. 

Here’s how it works.  As you pay premiums on a whole or universal life insurance policy, it builds cash value over time. Once that cash value has grown, you can borrow against it, often at lower interest rates than traditional loans. This option can be a valuable resource if you need extra cash for things like home repairs, medical bills, or even unexpected emergencies. 

The beauty of borrowing against a life insurance policy is that there’s no formal approval process, credit check, or repayment schedule. However, it’s essential to understand that unpaid loans will reduce the death benefit, meaning your beneficiaries would receive a lower amount if the loan isn’t repaid. 

Before taking a loan from your permanent life insurance policy, speak with a financial advisor to ensure that it is the best option for you. Used wisely, this feature can make your life insurance policy a flexible financial tool, providing peace of mind while helping you meet immediate financial needs. 

Stephanie Ehman, CIC, CPRM, CISP, CPSR, is a risk consultant at Knight Insurance Group.