How to Borrow Against a Universal Life Insurance Policy
The investment value of permanent life insurance is one of the reasons a customer chooses a whole life or universal life policy over term insurance. Universal life insurance builds cash value over time that is available to the policyholder to borrow. Insurance companies often make policy loans at competitive interest rates. Check the advantages of borrowing against your universal life insurance policy before taking out a loan from anyone else.
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Instructions
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Determine the cash value of your universal life insurance policy. Policy loans can only be made in the amount of accrued cash value. View your most recent monthly statement or the insurance company's customer Web portal to find your policy details summary.
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Consult your agent or the company's main office to request a policy loan. Inquire about all stipulations about a loan against your policy, including payment options and interest rates. Compare the insurance company's loan terms against those of other lenders. It may be advantageous to borrow from another financial institution, using your life insurance as collateral.
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Fill out a loan application request document and send it to the appropriate office. Your agent may agree to facilitate this from the local office. Most carriers make forms available to policyholders on the Internet. In many cases, an Internet form can be filled out on a computer and electronically sent to the office in charge.
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Make arrangements to receive a check by mail or via direct deposit. Give the loan payment office your bank account number and routing number to receive a payment through direct deposit.
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Tips & Warnings
Your life insurance policy can also be used as collateral for a loan from other financial institutions. The cash value can be assigned to the lender in the borrower's will, or the lender can be named the beneficiary of the policy upon the borrower's death.
The payment to the beneficiary is reduced by the amount of an outstanding loan and the unpaid interest in the event of a policyholder's death.
The surrender value of a policy is also reduced by an outstanding loan.
