Did you know that in some cases you can borrow against your life insurance policy? This article will discuss borrowing against life insurance policies, how this is done, when it makes sense, and what are the advantages and disadvantages. If an individual has a whole life insurance policy and there is cash value accumulated, then they have the opportunity to borrow against the policy. There are several distinct advantages to borrowing against a life insurance policy:
There are a few drawbacks to borrowing from life insurance.
And there are some additional considerations when borrowing against a life insurance policy.
Article by Erick G. Colon.
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Life insurance permanent policies contain exclusions, limitations, reductions of benefits and terms for keeping them in force. Accessing cash values may result in surrender fees and charges, may require additional premium payments to maintain coverage, and will reduce the death benefit and policy values. Loans are income tax free as long as policy is not a “modified endowment contract” (MEC) and policy must not be surrendered, lapsed, or otherwise terminated during the lifetime of the insured, and withdrawals must not exceed cost basis. Partial withdrawals during the first 15 policy years are subject to additional rules and may be taxable. Excess policy loans can result in termination of a policy. A policy that lapses or is surrendered can potentially result in tax consequences. You should consult a qualified tax professional for tax advice on your own personal situation.
Erick Geraldo Colon is insurance licensed in the states of: MA, NH, NY, NC, RI and TX. 230 Third Ave., 6th Floor, Waltham, MA 02451, 781-966-2980.2002151TM_Jun20