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What is a Life Insurance Loan?

Can I get a loan against my life insurance?

If the question is can I get a loan against my life insurance, then the answer is yes. Who can you go to for a life insurance loan is another question. You may be able to borrow from your life insurance company. You may be able to get a life insurance loan from a third party lender in the secondary market for insurance. In order to borrow from either, your insurance company or a lender in the secondary market for insurance, you have to meet certain conditions.

Borrowing from your life insurance policy

If you own a whole life policy or other type of life insurance policy that has a built-up cash value, you can normally borrow against that balance. Your life insurance policy may also have a clause or a rider in it that allows you, under certain conditions, to receive an accelerated death benefit. Usually, you have to be chronically ill or terminally ill, and have a very short life expectancy, to qualify for this type of loan from your life insurance company. An accelerated death benefit pays you out of your death benefit and thereby reduces the amount that will be available to your beneficiaries upon your demise. You usually have the option of receiving funds in a lump sum or spreading out the proceeds of the accelerated death benefit over the remaining time you have left in life. You do not have to take your entire death benefit early and any part that you do not touch will be there for your beneficiaries after you die. You may run into trouble if you try to exercise this option for one of two reasons. First, you may not be as close to death as you need to be to qualify. Second, your policy may not allow an accelerated death benefit, either because it was not part of the original contract, or, a rider, adding such a provision, was never added to the policy.

Borrowing from a lender in the secondary market for insurance

If you need money for out of pocket medical expenses or any of a number of other reasons, and you can not get a loan from your insurance company, you may be able to get a life insurance loan from a company operating in the secondary market for insurance. In fact, you may get better terms and have more flexibility when you choose this option. With this type of loan, you do not have to be chronically ill or terminally ill to qualify. In order to qualify, you must have a medical condition that results in a major decline in your life expectancy. You do not have to be of any particular age and you can still be eligible if your expected lifespan is 6 or 7, or even more. You can get a loan on almost any type of life insurance policy and when you qualify and accept such a loan, your premiums continue to be paid by the lender. At the time of your death, the loan and any other costs associated with the loan, is paid back out of your death benefit. Unused portions of your death benefit are paid to your beneficiaries.

In order to see if you qualify for a life insurance loan, you should have your policy valued. It is free to have your policy valued, and by doing so, you will learn how much you can borrow.

Free Policy Review

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