Borrowing From Life Insurance Cash Values

Borrowing From Life Insurance Cash Values

January 17th, 2012 // 9:34 pm @

Permanent life insurance builds up cash value that becomes part of the death benefit. In difficult times, policyholders can use the cash value to cover insurance costs or as a source of funds by borrowing or withdrawing the money.

Fact: Life insurance cash values serves as a source of available capital to individuals, especially when credit is difficult to obtain. There was $120 billion in life insurance loans outstanding at the end of 2009. Source: LIMRA analysis of SNL Financial LLC data

Famous retailer J.C. Penney borrowed from his life insurance policies to help meet the company payroll following the 1929 stock market crash. Source:

In 1953, Walt Disney borrowed from his life insurance, sold his vacation home and borrowed money from employees to fund Disneyland, his first theme park. Source:

Policy Loan Basics

  • Owners of permanent life insurance may be able to borrow up to between 75 and 90 percent of their cash value.
  • Policy loans can be a source of funds for individuals regardless of their credit.
  • No lengthy application is required to obtain funds.
  • Like many other types of loans, the loan is not taxable as long as the policy remains in force.
  • Interest rates are often attractive compared to unsecured loan rates available from financial institutions.
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