A life insurance
is more than just a death benefit. It’s a good investment option for those who
know the ground rules and can choose smart.
It comes with
several hidden benefits, and one of the most important would definitely be that
fact that you can take a loan on your life insurance. Making money out of your
insurance, can be a great way to generate some tax-free income, although you
need to keep in mind that you need to structure the decision carefully.
Keep in mind
that you can only leverage your life insurance and not make it an alternate
income. Also, the amount that you wish to borrow depends on the different types
of insurance that are available and the amount of cash that you have
One of the pros
of taking money from your insurance is that, the interest rate is low and there
isn’t much of an approval process.
As intriguing as
it sounds, you need to reconsider your decision carefully before jumping into
it, because unlike a conventional loan, if you fail to repay the loan, the
money would be deducted from your death benefit that your beneficiaries would
get. Although the risk may look minimal, you need to keep in mind that the idea
behind taking a life insurance is to cover the lives of your loved ones,
Thus it is
always essential that you stay away from easy temptations and, take a loan only
when you know you’ll be able to repay it.
So, how much
loan can you take out of your insurance?
is possible for you to borrow up to the cash value you have accumulated within
your permanent or whole life insurance policy, and you can do this by contacting
your life insurance agent financial planner. Also keep in mind that unpaid
interest can create trouble.
That is, if you
fail to cover the full interest due, that unpaid interest will accrue as income
and be added to the loan balance.
Unlike a bank
loan or credit card, policy loans do not affect your credit and there is no
approval process or credit check because, in simple words - you are just
borrowing from yourself. Just make sure that you aren’t venturing into policy
loans without assessing the risks.
So when an
unexpected incident occurs, and you need to repair your house due to a natural
calamity or pull in some cash for your small business, or pay for a brilliant
college opportunity – go ahead and take benefit of the cash value that you have
accumulated in your policy!
WRITTEN BY: BALAKARTHIGA.M