All Life Insurance Tips

Has anyone ever borrowed against a whole life insurance policy? And , if so how does it work/?

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1. Simple process: 1. Complete loan application, and submit to life insurance agent/company. 2. Receive check for loan amount. 3. Make monthly payments. Your cash surrender value is the "collateral" for the loan.
2. You need to call up the insurance company to know about the process of applying for the loan. Be prepared to supply them with the policy number and social security number for identification purpose. However, remember that borrowing against the policy would also affect the policy. Any unpaid loan amount along with the interest would get deducted from the death value at the time of payment, lowering the amount payable to the beneficiary. Further, borrowing against the policy would also have tax consequences.
3. The insurance agent you got the policy through should be able to help you with this. If you laugh because, like most people, you have not heard from your insurance agent since you purchased the policy I would find a new independent agent to handle the info gathering for you. Make sure you understand the provisions of the loan such as fixed or variable interest rates, interest crediting, the way the collateral works, etc. Certain policies can make it very effective to take a long against because they cash value can continue to earn dividends. To correct an earlier answer loans do not create a taxable event. However, if you default on a loan it may. Please let me know if you have any questions.
4. First of all there is no 'application' process for the loan. You just take it and it's generally a percentage of the overall cash surrender value - 80-90%, etc.. Each year, again generally speaking, they'll bill you the interest and if you don't pay it then they'll (generally) add that amount to your loan....you can continue to have the policy pay the interest until it maxes out and then the policy will lapse (if you don't otherwise pay the interest).
5. Some insurance companies will make the loan to the owner of the life insurance policy by recorded phone call. Endorsement of the check is the written proof of application. Other companies require a written loan application. Call your local agent, or the customer service department in the home office of the company. The cash and loan values are usually the same, unless the policy is a Universal Life. If that is the case, there is a requirement to keep at least $500 in the policy. If the policy pays dividends, you may take those without repayment, and no interest will be charged. Once the loan is made, you may or may not repay it. It's up to you, the owner of the policy. The loan, however, will accrue interest charges at the rate stated in your policy, usually somewhere between six and eight percent, depending on when the policy was issued. If the interest is not paid, it will be added to the loan balance. You may make loan payments as you wish. If the insured should die while there is a balance on the loan, it will be deducted from the death benefit. The cash and loan value in a life insurance policy may also be used as collateral for a bank loan. You may want to consider borrowing this way to help build credit if needed.
6. The business of insurance has to be one of the most underrated services offered in the United States nowadays. Not many people think having life insurance is important and because of this we see that the industry is not as successful as the auto and homeowners insurance business. It is important to know however, that death comes at any age; and if a person wants to protect their family or other people after their death it is imperative for them to purchase a life insurance policy. There are two basic types of life insurance in the United States that work in completely different ways and because of this have different premiums. One of these types of insurances is one that is called a temporary policy. This policy covers a policyholder for about 5 to 30 years and their premiums are most of the time stagnant. On the other hand we have the permanent policy in which members are covered for life as long as they pay all their premiums. Part of your premium will go toward a little saving portion of the policy that will accumulate over time and the other portion of the premium goes towards the insurance cost of the death benefit. Whole life insurance is one of the three types of insurance polices that you can obtain if you want a permanent life insurance policy. This means that whole life will cover you for life and that your cash value (saving portion) will get higher as time goes by. However, whole life is different in that your cash value is tax deferred until the beneficiary withdraws it and you can also borrow against it. A person should consider whole life insurance when the need for coverage is lifelong. Whole life may be used as part of your estate planning because it accrues money after a person pays the premiums, as mentioned before. Because premiums for this type of policy are much higher than those of temporary policies, a person must know that this is what they want after all. Whole life is a good choice if you want to make sure that your family or dependents have a good life after your death, and that the transition from the death of a person close to their lives is a close one. While the cost of whole life coverage is substantially higher than a term life policy with the same death benefit it is important to keep in mind that the reason for the difference in price is that the death benefit for the whole life policy will almost certainly be paid out - after all everyone dies sometime! With the term policy of course the insurance company is counting on not paying the death benefit out on over 90% of the policies it issues. The issue of life insurance should not be taken lightly if one has a family or dependents. While some people in the United States are fed up paying all the different kinds of insurances and they figure that they don't need to pay extra for life insurance when they are young, it is important to understand that life insurance can be a life saver after a family member, husband or parent dies. Whole life insurance covers you for life and it will allow a beneficiary to continue life only having to cope with the issue of death and not having to worry about the economic hits that come with it. Life insurance policies are a must for anyone that has someone that relies on them for support and it's time for all responsible Americans to realize that.