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Sources For Getting A Loan

How To Borrow Against Life Insurance

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Alternatives for borrowing money, using your life insurance as collateral are:

Cash Value

If your life insurance has a cash value, you can borrow most, if not all, of it. Interest rates are usually lower than commercial rates.

You don't have to pay the money back but you do still have to pay premiums (unless there is a waiver because of disability.) If you don't repay the debt, when you die, the amount that is outstanding plus interest will be deducted from the death benefit payable to your beneficiaries.

Check with the insurance company to find out what affect, if any, the loan will have on future dividends, premiums and cash value.

"Living Benefit" (Also known as "Accelerated Death Benefit.")

Your policy may have a "living benefit" also known as an "Accelerated death benefit." Under this provision, the insurance company advances you part of the death benefit, often as a loan. If the amount is a loan, it is repaid from the death benefit. The difference between the amount and the benefit goes at your death to your beneficiaries.

Even if your policy does not specifically say there is a living benefit, it is worth checking with the insurance company. They may be able to add the benefit - at no cost.

Friends And Family

You can borrow money from friends or family. See Friendly Loans Against Your Life Insurance Policy

Note: If you have a shortened life expectancy, or you are over age 65, you may be able to sell your policy in a Viatical Settlement or Senior (Life) Settlement.

Commercial Lenders

There are a few commercial companies that will loan you money against your policy. See A Commerical Loan Against Your Life Insurance Policy.

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