All Life Insurance Tips

whole life insurance policy?

My whole life insurance policy has been paid up? My mom borrowed money off of it in the past...how much are you allowed to borrow on that?

Public Comments

1. Get the last statement and there should be an agent of record that you can contact, or call the company with the contract #, and they will answer all of those questions. Nobody here on Yahoo answers can tell you for sure with such limited info.
2. If your mom borrowed from it, it is probably no longer paid up. Better get an "inforce illustration" and talk with an agent who can help you.
3. You can borrow up to the amount of the cash value of the policy. Ask the insurance company how much that is. Note that there will be interest charged on the loan, but that you are not required to pay it off. However, if the insured dies and the loan is still in existence, it will be subtracted from the payout.
4. Terrible advice Wide Awake. If the policy does not have enough cash value to maintain it in force, and it collapses, the Owner will get a 1099 for all "borrowed" money since the policy was opened in day 1. Be VERY careful about taking loans from a Whole Life policy. If you no longer need the insurance and want the values to grow, consider a 1035 exchange to a Variable Annuity. Just be careful about cancelling the policy with outstanding loans. They become taxable to YOU in the year of cancellation if you own the policy. A possible alternative is to ask for an in-force illustration lowering the amount of insurance to the lowest possible amount to help preserve cash value and prevent the tax nightmare that might result of the policy lapse.
5. Being a paid up policy, no more premoums are required. However since a loan existed, ask your agent for the balance on the loan and create a repayment schedule. Loans on whole life policies are subject to interest (depends on your policy). The amount your mom was allowed to borrow changes every year, but if it is not a Universal LIfe policy is most likely that the borrowed money is less than her premium payments and won't be taxable.