Can I Borrow Against My Veteran's Life Insurance?
A life insurance policy through the Department of Veterans Affairs is a special type of life insurance policy offered to military veterans. This type of life insurance may be a cash value policy. As with all cash value policies, these insurance contracts build an equity value you may use during your lifetime.
Other People Are Reading
-
Precondition
-
You must have cash value available in the policy in order to borrow against it. You must also have paid premiums for at least one year and be current on all premium payments. Your life insurance policy must currently be in force. You must also have a permanent life insurance policy that normally builds a cash value associated with the death benefit.
Process
-
Apply using VA Form 29-1546, "Application for Cash Surrender Value or Policy Loan." This form will give you access to your life insurance policy's cash values. Your military life insurance policy normally has some guaranteed elements to it. One of these elements is the loan rate. When you borrow money, your loan rate is fixed at 4 or 5 percent if you took out a loan prior to November 2, 1987. Any loans after that date are charged a variable rate ranging from 5 to 12 percent.
-
Benefit
-
You may take out multiple loans against your policy. If you have multiple needs, this allows you to use substantially all of your policy's cash value amount. The cash value policy loan doesn't need to be repaid prior to your death. Instead, you may accumulate loan interest and keep those loans open until your death. Any unpaid loans are deducted from the policy's death benefit that is paid out to your beneficiaries.
Consideration
-
You cannot borrow more than 94 percent of your cash value. Any loans that are not repaid do reduce the amount of death benefit paid to your family, so you should consider repaying these loans if your beneficiaries need the money. Also, the variable rate loans could dramatically reduce your available cash value amount, and even prevent future loans, if your policy's loan interest causes the policy's cash value to drop to 6 percent of the total cash value. Your borrowing activity will be suspended. Your policy may be converted to a reduced paid-up life insurance policy.
-
