borrowing on a life insurance policy?

Question

If a life insurance policy was created more than 2 years ago and it's worth $100,000. How much would you be allowed to borrow from it today.

Answer 1

Probably nothing - it hasn't been in force long enough.

If it's TERM insurance (which, btw, is the BEST insurance deal going) then you can NEVER borrow against it. If it's whole life, after a few years (like five) you can usually borrow up to 10% of what you've paid into it.

That's why it's a rotten deal. Say you're 25. If this is a term policy, it's probably costing you $200 a year. If it's a whole life policy, it's probalby costing you closer to $2500 a year. So after two years, on a term policy, you've paid $400. On a whole life, $5,000. But if you have any cash value built up, it's probably worth about $500.

If you had purchased term, you'd have $2100 extra, and you WOULDN'T have to ever pay it back.

Answer 2

Term insurance is a policy with a set duration limit on the coverage period. Once the policy is expired, it is up to the policy owner to decide whether to renew the term life insurance policy or to let the coverage terminate. This type of insurance policy contrasts with permanent life insurance, whose duration extends until the policy owner reaches 100 years of age (i.e. death).

These type of policies provide a stated benefit upon death of the policy owner, provided that the death occurs within a specific time period. However, the policy does not provide any returns beyond the stated benefit, unlike permanent life insurance policies, which have a savings component that can be used for wealth accumulation.

If you have a term policy with a value of $100,000 then you can't borrow from it. If you have a permanent/universal/whole life policy valued at $100,000 then this value is probably made up of:

1) Face value of $100,000 (which you can't borrow from)
2) Cash value (accumulates in addition to face value of $100,000) of $0.00.

You can only borrow from the cash value side of the policy & not the face value.

Try getting an instant quote below. Policies start at as little as $3 per month.

Life Quotes: http://www.insureme.com/landing.aspx?Refby=615159&Type=life

Take care,
Ron @ InsureMe

Answer 3

You'll need to call the agent that wrote the policy or the company that issued it. Make sure you have the policy number when you call and ask them what the loanable value of the policy is. Also ask them what the interest rate on the loan is. I have both whole life and term life insurance for myself and wouldn't have it any other way. Its not a great idea to borrow money on a life policy though and I would research my options (home equity, personal loan..) before pulling money from your life policy.

Answer 4

The amount of cash value in your policy should be stated in your policy. Its probably only have a few dollars to maybe $1000, depending how long you have the policy for. Your life policy is not worth $100,000, this is just the death benefit. The actual worth of the life policy is how much cash value you have in the policy.

Every year, your life insurance company should send you a statement on how much cash value you have in the policy.

Answer 5

If yours is a permanent/cash value life insurance policy. If there's any cash value less surrend value/allowance.. you can borrow from this amount. Also depending on any clauses and min. amount you can borrow. If you cash surrender balance is less, you can't borrow.

Answer 6

Term insurance is a GREAT deal IF (and IF is a mighty big word) you are disciplined to save enough during the insurance term (30 years if it is a 30 year term policy) to pay all of your bill through the rest of your life and you have no large unforeseen expenses like uninsured medical bills, a larger home or second home later in life, care for aging parents etc. It is also a good deal if you are guaranteed to die during the term.

Term has its place but perhaps it is best to own both term and permanent insurance.

Go talk to one or more agents in your area.

Good Luck.

Answer 7

An insurance policy has a conditional value and might be worth $x at any given time but if never claimed is worthless.

Answer 8

I recommend you talk to your agent about this.

But from my limited knowledge... you'd receive (around) 100k if you died. However, you might not have 100k in equity (i.e. face value). I doubt you can borrow against the 100k... but rather the equity.