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| *Ostroff, Fair and Company>>>Insurance |
Borrowing money from Whole Life Policy ? |
I have a whole life policcy for 25 years, my cash value is built up to $300,000, and my total death benefit is around 1 million. I want to borrow money from the bank, from the total death benefit instead of cash value because I can borrow more money with the total death benefit. Does anyone know if I can do that with any bank? Just like a Home Equatiy Loan, the bank will hold my policy and I have to pay the interest that I borrowed. Does anyone have any experience on that?If you do, please explain to me what you did. thank you First of all you should not be owning a life insurance policy individually. At your death this death benefit will be part of your estate. If the policy is owned by an irrevocable trust the death benefit would not be part of your estate and your family could save a lot of tax dollars. However if the policy were owned properly you would not be able to borrow money against it. I would doubt that a bank will lend any more than the cash value since they don't know when you will die and they won't be willing to wait for their money if you default on the loan. They will look to take the cash value to satisfy your debt to them. With that why don't you look to borrow from the policy. Policy loans usually carry a favorable interest rate, you pay the interest to your policy and the death benefit stays with your heirs. dang you got a lot of money but i think you can talk to the bank and work somthing out You can do much better than what you will get from a bank. There is a whole controversial industry out there called 'investor owned' or 'stranger owned' life insurance. It's an industry that capatilizes on people in just your situation. Since it is a pretty sure bet that you are going to die and have a $1-million payout someday.....there are investors who will look at your age and will be willing to cash you out.....in other words have you change the beneficiary to them for a set amount of money. This happens all the time. There was a really good article in the New York Times this week about this and the controversy surrounding it. (It really helps out some insurance customers who really need the cash....but it really, really messes up the actuarial tables used to calculate how much you should have been paying in premiums). Do a little more searching for these arrangements and you will certainly find somebody willing to help you out. Just make sure you get a high enough price for a policy that as long as the premiums get paid.....will be guaranteed to pay out. http://www.nytimes.com/2006/12/17/busine... You can't borrow from the "death benefit". You can only borrow from the "cash value". Because if you don't pay the money back, AND you don't die, they can't collect otherwise. Actually, your life insurance company should let you borrow against the cash value (lol, your own money, they're letting you borrow! and you have to pay INTEREST to them to borrow your own money! I find this amusing.) agent, 20+ years you should be able to borrow a portion of the cash value, but usually the insurance company won't allow the total cash value to be borrowed against so that there is sufficient value for the policy to run off of (monthly cost of insurance, expense fees, etc). you have the option of paying back the loan, but any loan balance at death will be deducted from the death benefit. in addition, interest will be charged each year there is an outstanding loan balance. if you go to your bank and take out a loan, they may require that you list them on the policy as a collateral assignee. this allows them to collect what is owed on your loan at death, with the remaining portion paid to your beneficiary. its not recommended that they be listed as beneficiary because they will receive the full death benefit no matter how much you took the loan out for. |
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