Life presents us with unexpected events–sometimes those are joyful such as the birth of a baby or a wedding, sometimes they are sorrowful as in the death of a loved one. But, sometimes, economic conditions and/or health issues arise that have not been considered in one’s financial planning. What do you do?
People will often turn to their credit cards and run up huge debts with high interest rates. Or, they will refinance their house, their business or completely deplete their savings. Most frightening of all, some people will do a combination of all of the above. Have you considered tapping into your life insurance policy for a loan?
You cannot borrow against all life insurance policies. Term Life insurance has no additional savings that grow as the policy matures. Permanent Life Insurance, of which there are several types, has a cash accumulation value. The differences between these forms are listed below:
- Whole Life: Fixed premiums as long as policy is in effect with guaranteed cash accumulation value
- Universal Life: Adjustable premiums and payment times with a guaranteed cash accumulation value
- Variable Life: Investment flexibility and can designate cash value investments. No guaranteed cash accumulation
- Variable-Universal Life: Adjustable premiums and payment times with investment flexibility. No guaranteed cash accumulation
Besides selling your policy outright, Whole Life or Universal Life provides the quickest and simplest way to obtain funds for emergencies. Both Whole Life and Universal Life have a cash accumulation value that allows borrowing, No questions asked. Interest rates on borrowing are usually less than those of borrowing from a bank. Your credit is no impacted when you borrow against your own life insurance policy. The pay back schedule is open to your schedule. The amount borrowed can be subtracted from the death benefit, if it is not repaid. Finally, there are no tax consequences of borrowing against your life insurance policy.
Before you borrow against your policy, it is recommended that you check the amount in your cash accumulation account and that you ask about the interest on a loan against the account. Have the numbers clear before you borrow.
To find the best insurance policy for your needs, call and speak with an insurance agent or one of our knowledgeable representatives today. Life insurance is a powerful tool when used correctly.