Can money be borrrowed from a whole life policy without penalty?

Question

Have whole life policies for son and daughter, would like for them to be able to use the funds for first time down payments.

Answer 1

Well, it's NEVER without penalty.

First of all, you can only borrow from the CASH VALUE, not the face value. SEcond, the INTEREST is payable to the insurance company. And if they die before paying it back, while the policy is still being paid, the loan amount AND INTEREST are subtracted from the payout amount. If you STOP paying the policy, it cancels pretty quickly.

does it make sense to borrow from the whole life policy? Well, it voids the POINT of life insurane. Whole life doesn't make much sense to me ANYWAY, in most cases.

You might just as well cash in the policies and cancel them; you'll get the cash value, WITHOUT having to pay any interest to the insurane company.

Answer 2

This question has been asked several times in the last week for some reason. Do a search here on Yahoo Answers to see what other people had to say.

The short version of my answer: Yes, although there may be a smarter way to do it. Always order an "inforce illustration" when you plan on a significant change in your policy to see how it will affect things. In your particular case, your kids should consider borrowing from their policy vs. doing 100% financing or an 80/20.

Oh, and if you own the policy, they can't borrow from it, only you can.

Answer 3

Yes, however if you borrow from the policy the insurance company will charge you interest on the loan even tho it is your money. You do NOT have to pay it back. in the event of a death you would have the load amount subtracted from the face amount and that is why you are charged the interest because the insurance company would be investing the money you took out.

Answer 4

Yes and no. You can borrow up to the amount your insurance co allows. You can call them for this amount. You would pay interest and the amount must be paid back. Failure to pay interest let's them take the interest out of any balance on the insurance. Once it hits zero, you lose the policy.

Answer 5

The interest is penalty enough. If payment is not remitted, interest will eat up the remaining cash value until the policy no longer has any value, living or dead.