The main aim of a life insurance policy was merely to provide a death benefit to a beneficiary at the demise of the policyholder. However, with constant changes in the industry, several additions and corrections have been made by insurance companies to their packages. Different kinds of life insurance packages now allow life insurance policyholders to have investments and savings and borrow against their policy.
Policies that allow borrowing
Borrowing from your life insurance policy is possible. As an owner of a permanent life insurance policy or a universal life insurance policy, you can borrow from your insurance plan whenever you wish. The reason for this is that these policies have a method of creating a cash value over the years as you continue to pay your premiums.
The premiums you pay continuously for at least five years would be reinvested by your insurer once you have exceeded the value of your death benefit. It is however important to note that your insurer charges interest on loans collected.
Policies that do not allow borrowing
It is not all life insurance policies that policyholders can borrow from. If you purchase a term insurance policy, you can’t take out a loan from it because it is considered to be cheap and purely a life insurance policy. Its value lies only in the death benefit that would get to the beneficiary at the passing away of the policyholder.
How to request a loan
Contact your insurer via a phone call or by going online to your account. Fill an application and provide all necessary information and the amount you wish to borrow. Sign and date the documents accurately and submit by mail or fax for processing by your insurance company.