Yes, it is possible to borrow from a life insurance policy, depending on the type of life insurance policy and what type of policy you have. Generally, a life insurance policy is intended to pay out death benefits should something happen to the insured, so they are not traditionally used as a way to access money while the insured is still alive; however, certain life insurance policies come with provisions that make it possible to access cash. These policies are typically known as “cash value policies”, and most frequently come in the forms of Universal Life, Whole Life or Variable Life policies.
When considering whether a policy can be borrowed against, the first thing to look for is whether the policy has a “cash value” - if so, this indicates that it can be borrowed against. The amount that can be borrowed is the lesser of your policy’s "cash value" or the policy’s "death benefit". In order to borrow from the policy, you must submit a request to your insurance company, and the funds will be sent directly to your bank account. Furthermore, you’ll need to pay interest on the loan, as well as maintaining current policy premiums in order to continuing keeping your life insurance policy active.
It’s important to note that borrowing against a life insurance policy can have significant implications, which include impacting the death benefit provided to your loved ones and the possible impact on the policy’s cash value. Therefore, if you’re considering borrowing against your life insurance policy, it is strongly recommended that you consult with a financial advisor.
