How to Get a Loan on a Life Insurance Policy
Permanent life insurance policies are insurance contracts that accumulate cash value. Whole life, universal life and variable Universal life are the three main types of permanent insurance. This cash value can be accessed tax-free via policy loans. However, when you access policy cash via a loan, your death benefit is reduced by the loan amount if you choose not to pay the money back.
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Instructions
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Determine how much of a loan you'd like to have. Before contacting the insurance company, you'll want to know how much cash you'd like to loan out of the contract. The contract may have more or less cash available than you need.
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Call the insurer to ask for illustrations. An illustration shows you the policy's cash value, death benefit and premium. You'll want to ask for a current illustration and an illustration that shows a loan for the amount you need. If the policy has less cash available than you need, ask for an illustration showing a maximum loan.
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Review the illustrations. The insurer should have the policies mailed to you in a few days. When you receive them, look over the current illustration and the illustration showing the loan. Make sure to look several years out to see the coverage differences between leaving the policy alone and taking the loan. If you choose not to pay back the loan, your coverage amount will be reduced by the amount of the loan.
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Take the loan. Once you've looked everything over and have decided how much of a loan to take based on the illustration, call the insurance company back and ask them to process the loan. They will likely require some paperwork to do this, but the whole transaction should take less than two weeks.
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