Taking a loan against your insurance policy is possible if you have the kind of policy that carries a cash value. In the broadest terms, a whole life policy is generally the type of policy that carries a cash value portion. Generally, there is a minimum and maximum amount available for a loan. Those guidelines will be defined in your policy. If you do not have a copy of your policy to look at, you can ask for one or just call your agent for information.

Loan Options

So you are in need of a little extra money. Looking to your insurance policy is one option. Should it be the first? Probably not. It does reduce the death benefit. If that is not a concern then you would next look at the offered interest rate. If it is lower than a traditional loan or you do not qualify for a traditional loan then it is certainly an option you should consider.

Your first step should be calling the Customer Service department at your insurance company. Let them know what size a loan you need and they can begin to give you an idea of how much and under what terms you can borrow money against your policy. Ask them to send you some examples of loan amounts, repayment terms and differing dividend options.

Once you know the terms of the loan you can compare it against your other options. You may need to provide paperwork including a signature to the insurance company before they will provide you with the loan check. Be sure you completely understand the terms of the loan and how it affects your policy in the long and short term. There is absolutely no reason you cannot call your agent or the company and have them illustrate for you, on paper, how the loan will affect your death benefit over the life of the loan. If you find that it decreases your death benefit too much, you can ask for estimates on increasing your death benefit. This will mean higher premiums but you can at least see the cost vs. benefit and see if it fits your needs.

Have them show you multiple loan amounts and repayment options. This is your policy and you have the right to see exactly how changes will affect the coverage you purchased. There is no such thing as too much information.

Last Step

After you have signed any requested paperwork you should get a check or direct deposit within a few business days. Your life insurance policy is there to serve you. One of the benefits of a whole life or universal life policy is the ability to have access to emergency cash. Just be sure you understand how the loan affects your premiums in the future if you are on a flexible premium policy. When you alter the cash value it can increase your premiums in some cases. Speaking with a company representative is fine but you need to ensure you understand exactly how the loan affects you. Asking a third party with contract experience to interpret your policy is a good idea.

Before you call your insurance company and ask if you can take out a loan on your policy, take the time to weigh all your options. Make sure it is the right choice for you and that it keeps your policy in a place where you will still have enough of a death benefit to meet your needs should the unthinkable happen. Once you decide it is the right move and you make the request you should have that money pretty quickly.