You must have heard that you can borrow money from your life insurance policy. But what some dishonest life insurance agents will not tell you is that you can only borrow funds if you own a whole life insurance or permanent life insurance policy, which is quite expensive. In order words, you are not eligible to borrow against term life insurance. Read on to know the truths about borrowing money from your life insurance policy.
- You can borrow from your permanent life insurance policy without providing any compelling reason why you need the money.
- You can borrow funds from your policy only if you have sufficient money in your cash-value account.
- The amount you borrow from your life insurance policy is free from tax.
- You will pay tax on the loan if your policy lapses before you refund it.
- If you die before you pay back the loan, life insurance companies will deduct the loan and the interest accrued from your death benefits
- You are expected to pay the loan with interest, which is low compared to the interest rate of bank loans.
- You may not get any bonus or dividend generated by life insurance companies if you don’t pay back the loan against your policy.
- Your life insurance policy may collapse if you don’t pay back the loan on time.