Should You Borrow Against Your Cash Value or Withdraw It?

Need a chunk of change? Perhaps it’s an emergency, perhaps it’s a business opportunity, or it may simply be a periodic major purchase such as a new car. Either way, it’s bound to happen. You’ve got a need for cash, and you have to decide whether to get the cash from a credit card, a retirement account, a home equity line of credit, or somewhere else.

Would it surprise you to know that if you’ve been paying whole life insurance premiums, you’ve been saving just for this situation? Your premiums don’t just contribute to a death benefit after all. You also get benefits, such as your cash value, to use while you’re living. This is just one of the reasons that whole life is such an efficient financial product.

So how do you use the money you’ve accumulated in your policy? Should you take a policy loan or simply withdraw the money from your cash value? (Many people talk about “borrowing” their cash value but that is incorrect. You can either withdraw it, or borrow against your cash value.)

Withdrawing Cash Value is Simple

You simply take it out and go! Yet there is a long-term impact to withdrawing your cash. Withdrawal means liquidation, which means you lose that part of your asset. You cannot put money back into your policy, so ultimately you have less cash value left to earn dividends, grow for the future, or borrow against. It’s important to consider the opportunity cost of this decision. However, for many people, there’s an advantage to having no interest charges or penalties. (Though you may pay some income taxes, depending on how much you take.)

Borrowing Against Cash Value is ALSO Simple

When you borrow against your policy, you take a loan from the life insurance company with your cash value as collateral. When you do this, you usually have your money within a week. There are no qualifications required (other than sufficient cash value). Most companies will loan policy owners up to 90% or more of their cash value balance, while the cash value still earns dividends. However, you must pay interest on the loan, which currently varies between 5-9%, depending on the mutual company.

In this post, we’ll give you our rules of thumb to help you decide which is right for you—a cash value withdrawal, or a whole life policy loan.

Advantages to Using a Policy Loan

Some “pros” to using a policy loan are:

  • While you pay back your policy loan, the underlying cash value you are collateralizing keeps growing. Your cash value continues to earn dividends, which offsets the interest you pay.
  • There are no qualifications required for your loan, other than having the cash value to borrow against.
  • You can pay back the loan on your own schedule, fast or slow, steadily, or in a lump sum.
  • You pay interest in advance on an annual basis. Yet if the loan is paid back early, you will receive a refund for the “overpaid” interest.
  • Loans are tax free (as long as your policy remains in force, and your repay your loans eventually).
  • Whole life policy loans do not affect your credit and are not tracked by the IRS, credit reporting agencies, banks, or anyone other than you and your insurance company.
  • Should you find yourself unable to pay the loan, you could still pay for it with your cash value, liquidating that part of the asset, but erasing the loan.

What Are the Disadvantages?

The main disadvantage to policy loans are, obviously, the interest. Interest rates currently being charged for whole life policy loans are between 5 and 9%. And contrary to common urban legends, you do NOT pay the interest “to yourself.” At least, you’re not doing so directly. Instead, the interest you pay goes to the insurance company (who services your loan). The interest you and all policy owners pay to the insurance company benefits the company. And as a policy owner, it benefits you, since they pay profits to policy owners. (A whole life company is a mutual insurance company and is structured more like a cooperative than a corporation with stockholders.)

The main advantage of withdrawals is simple—you don’t have to pay it back! It’s your money, and you are free to take it without penalty or taxes (yet only up to your basis).

Cautions About Policy Loans and Withdrawals

Some reasons you might not want to borrow against your policy (if you can help it) include:

  • Withdrawals are treated as taxable income if you take more out than what you put in to the policy. If you withdraw repeatedly, you risk creating taxable events.
  • Withdrawals reduce your current and future dividends, because it reduces your cash value. Your dividends are based on your cash value amount.
  • When you withdraw money, you cannot “put it back.” That is simply the rule of insurance. You can pay NEW premium, and earn NEW cash value. However, you cannot “put back” withdrawn money into your cash value.
  • Policy loans, as well as withdrawals, reduce your death benefit. (This is not a terrible thing in most cases, as a properly set up policy will have an escalating death benefit over time.)
  • Interest continues to accrue on unpaid policy loans. If you have no plan to repay, and you expect to live decades longer, withdrawing is a better option.

Managing Your Whole Life Policy for Maximum Benefit

The financial mainstream trains consumers to avoid debt and “pay with cash.” So it might seem like a no-brainer to simply withdraw your funds rather than take a loan. Yet if you look at your whole financial picture and consider the potential future costs of this decision, you may see things differently.

Some Questions to Consider:

Do you have the means to pay a policy loan back?

If you have steady income, or even a history of steady income, policy loans make perfect sense. Perhaps you work on contract and are just in between contracts. Or perhaps your income is not the issue, you just simply had a large expense or purchase. Even if it may take months, even years to pay it back, if you believe you can pay it back, the loan is the way to go. That way, your cash value can continue to benefit from uninterrupted compounding growth. This is a perk that a regular savings account cannot typically be used for.

You may also be interested to know that as the policy owner, you have a significant amount of control over your loan. While you cannot dictate the interest rate, you can control your repayment schedule completely, making it more flexible than a credit card or bank loan. So if you have the means to repay, a loan is a great option.

If you cannot conceive of paying back your loan because of a continuing lack of income, (perhaps you are no longer working), a withdrawal is almost always the best choice.

How old are you? What are your circumstances?

If you are 90 years old, and no one is depending on your death benefit, you can still take a policy loan. You can have this peace of mind because your death benefit will cover your outstanding balance.

However, if you are in your 70s or even in your spry 80s with limited income, you may be better off withdrawing rather than borrowing against your cash value. After all, a loan will continue to accrue interest. This can spiral if not paid. And if you live for 10, 20, or even 30 more years without paying loans, your policy could implode.

If you are younger, withdrawing is going to have a greater negative impact on your savings. As a general rule, we advise someone who is active and has sufficient income to pay off a policy loan to borrow against their whole life cash value rather than withdraw. However, if you feel you have limited prospects for future income sufficient to repay the loan (and don’t want your life insurance to lapse), withdrawal is the better option.

Is your need for money temporary?

If you need the money for a limited time only, a policy loan probably makes the most sense. You don’t want to compromise your long-term savings because of a temporary need, if possible. (Yet again, consider your age and circumstances.)

Are you using the money to create more money?

Our own Kim D. H. Butler was interviewed on the popular Real Estate Guys about how whole life insurance makes a great companion to real estate investing, because it’s an ideal vehicle to provide short-term cash for investments. With real estate investing (and many other businesses), you can have short-term cash flow needs, and be able to use that money to generate a return, which allows you to pay off what you have borrowed.

We even have clients that borrow against their cash value to make short-term, fixed-rate loans secured against real estate or other assets that can bring them returns MUCH higher than their cost of obtaining the money through the policy loan. (This should only be done very cautiously, but can be a powerful wealth-building strategy when carefully considered.)

Have you measured and considered your opportunity costs?

When making a major purchase, such as a new roof or a new car, many policy owners actually strategize intentionally to borrow against their life insurance cash value. In this way, they minimize the opportunity cost of paying cash.

We are trained to measure interest paid on debts, yet learn very little about opportunity cost. This concept helps you identify interest not earned when you save in a bank and pay cash, rather than storing that money where it can grow. Opportunity cost is every bit as important to measure as the interest you’re paying (if not more so). We either “pay up or pass up” interest, and it is critical to have MORE MONEY working for you than less money, even if it creates temporary debts in the process.

Learn more about Opportunity Cost in our post about the real cost of financial decisions.

To Borrow Against or Withdraw: Which is the Best Option for You?

It is essential to consult with a life insurance specialist before purchasing your cash value life insurance policy and they can help you construct your policy to meet your goals and objectives when it comes to taxes, death benefit payouts, income, even how you may wish to use policy loans.

If we can help you set up a life insurance policy, consider your available options, or answer any questions you have about insurance, we’d love to hear from you. You can connect with us here, or email we*****@pr****************.com.

44 thoughts on “Should You Borrow Against Your Cash Value or Withdraw It?”

  1. Hi,
    I’m 59 and have a NYL Whole Life policy with dividends for coverage over $300. Paying almost $1K/mo since 2016. My situation has changed and really don’t need that amount of coverage. My NYL advisor said I could allows take a loan for the cash value currently at $60K and not pay it back which will reduce the coverage minus that amount however I still have to pay the 5% annual fee to NYL. My question is should I just end the policy and take the cash which I know I’ll have to pay taxes on the dividend income and invest the $1K/mo or pay down on my 3.75% mortgage?

    1. From the info you’ve given, consider asking for a reduced paid up policy. That would be more efficient and permanent than taking a loan against the cash value. They will send you an “inforce illustration” and if you need help, send it to us and Kim will reply via email.

  2. Pingback: Whole Life Insurance: A Firm Financial Foundation |

  3. Hello, Thank you for all the insight that has been so hard to find from our Accordia life ins. agent. After reading about your take on how powerful taking a loan on cash value is. Loaded question here, understanding that the stock market can go down. , Could it be a good strategy to take a loan on our cash value and invest in the stock market as long as it is for a long period to take advantage of the ups and downs but over the long period it will be up. We are near 60 now. threw a lot of cash at our policy when our kids were young as a safe place to grow like our bond allocation. (worth 400k now) Our kids are older and policy is underperforming the stock market… but still safer as we near retirement.
    Thank you so much, Dave

    1. Hi Dave, we would NOT suggest that strategy–borrowing from life insurance to invest in the stock market. Much too risky at any time, but especially after a long bull market, it could be devastating. Actually, we would only recommend borrowing to invest if the returns are known or predictable… perhaps an investment property with a known ROI or a mineral rights lease with a contractual return.

      However, if you have money in the stock market, having cash value to depend on can make THOSE returns better, as you won’t have to pull money out in the “down” years.

      I would recommend talking with Kim Butler as she would have ideas for both growth and cash flow that may be helpful. (For instance, it could make sense to annuitize a portion of a policy when you are older to create more income, or a life settlement fund might appeal to you as it is an investment backed by life insurance, but with more upside potential.)

      I apologize for a slow reply (this comment snuck through while I was on vacation), but I would invite you to reach out to we*****@pr****************.com and request a meeting with Kim. (Say that Kate suggested you get on Kim’s calendar… I believe she can help with some “less volatile” ideas to make the most of your money.)

      This article gives an overview of some investments we can help with, along with some timely information and resources that emphasize the risks the US stock market right now: https://prosperitythinkers.com/where-to-invest-2020/

      Thanks,
      Kate

  4. Hello,

    I read (and agents tell me) that i can take a “withdrawal” from my cash value (WL policy), up to the premium i put in and will not have to pay tax on that portion. Also, the partial withdrawal amount would reduce the death benefit, dollar for dollar.

    However, i called a couple of insurance company and they tell me i can only get cash from my CV only through a loan. I can get the dividends only.

    Access to the CV is really important so i can get back money and use later in life. I don’t want to have to borrow and pay any interest. Who is correct here? I would say the insurance company since they will be the one who will have to give me the money. But then is the insurance agents who i am suppose to trust and most knowledgeable about the product not telling me the truth? Help me Kate.

    1. That doesn’t seem right! (Unless perhaps it is a new-ish policy that has temporary restrictions on withdrawals?) If you have something you can email to our team at we*****@pr****************.com perhaps Kim or Theresa can help you sort it out!

      Also be sure to read our article about how annuitizing a policy later in life can be the best solution for cash flow: https://prosperitythinkers.com/lifetime-income-annuity/ You can simply CONVERT a policy to an annnuity (no withdrawal needed), although it can also be worth comparing other options when the time comes. (If you no longer needed the policy you could cash it out and go with a different company for the SPIA. But we only recommmend that in your 70’s or beyond). Ho[pe that helps!

  5. Dad, almost 81, has a $10K WL (“Traditional Life”) policy against which he’d borrowed $ at some point. He needs Assisted Living, which he cannot afford, and in Ohio WL counts as an “asset” and he needs to possess assets below the $2000 cut off. Trying to decide whether to cash out policy, or transfer ownership to Funeral Home of his choice at this point. Policy Issue date ~ 13 yrs ago: 11/28/2006, so @ point where, had he not borrowed against it, he’s ~ paid full value INTO policy=Death Benefit of $10K. As of Oct 18, “Gross Cash Value” (excluding dividends) is $3892; The “Outstanding Loan” currently = $3644. Not sure what “Net Loan Value” is, but is listed = $64.26.

    Trying to decide whether to cash out at lower level of benefit (given the loan), which I am believing to = $3892, OR whether to “Transfer Ownership” to Funeral Home of his choice & continue paying premiums? I know you haven’t a crystal ball, but if this were your CRAZY parent in the same situation, what advice might you offer? Thank you!

    1. Hi Stacie, Kim thinks it could be a good idea to transfer the policy to the funeral home if the death benefit would be used to pay costs that otherwise the family would pay. (You’ll have to ask if you will be credited for death benefit or just cash value, in which case maybe not such a good deal.) But also, consider paying OFF the loan with the available cash value. You would do this with a cash value withdrawal. You will then have much less cash value but also no interest costs on the policy loan!

      Also know that if you did not WANT to pay further premiums, likely they can be stopped. If he has had the policy for 20+ years that should be doable by contacting the insurance company. (It just means the death benefit won’t keep growing.) See this article for more info: https://www.prosperitypeaks.com/stop-paying-life-insurance-premiums/

      Definitely talk to the insurance company about both of those changes. Doing a withdrawal and halting premiums will both shrink the death benefit but chances are you could keep the (smaller) policy with no further out of pocket expenses which might be of value to you. At any rate, you can look at the options, do the math, and decide what makes sense.

      Hope that helps! Kate

  6. I have a variable life insurance policy. The current death benefit is at roughly close to 100k
    Original Face value: 57k
    Cash Value: 27k (14k basis+ 13k earnings)
    No outstanding loan. If I did a partial withdrawal of my entire cost basis roughly 14k does it change the face value of the policy besides the death benefit.
    So face value would drop to 27k
    Cash value 13k
    Death benefit: 40k
    Does that seem right? I feel like the calculation I was given is wrong.

    1. Hi Yani, you can ask your insurance company to give you a new illustration based on that withdrawal. Likely the face value will drop more than the $14k withdrawal amount but not as much as you predict.

      Do keep in mind that because it is a variable policy, depending on the underlying investment, the cash value and face value are not guaranteed and can fluctuate with the markets. Hope that helps!

  7. Hi,

    I’ve been unemployed for about 5 months now and decided to look into withdrawing from my UniLife policy of 12 years. I’ve never borrowed or withdrew any money in the 12 years. My cash value is only $2548. Does this sound about right to you?Thanks in advance

    1. Hi Jobu, I don’t believe UniLife is whole life… not familiar but guessing it is Universal Life?

      With whole life insurance, your cash value could equal or exceed all premiums paid (with maximum paid-up additions). Hopefully your policy has performed similarly. Of course a policy can be small or large so there is no “normal” amount of cash value, as you could pay $50/month of $10k/month.

      Hope that helps. We are not fans of Universal Life as they tend to have big problems later on when people get into their 80’s or beyond. See https://prosperitythinkers.com/surrender-a-universal-life-policy/ for more. And we hope you land a great new job soon! Kate

  8. Hi,
    I recently became a stay at home mom and I was looking into withdrawing from my life insurance to cover some expenses. I’m super new to all of this so I hope I’m getting this right. It says my cash value is 3,384 and the paid up dividend additions are 332. Why does my policy only add up the paid up dividend additions of 332 and not the cash value when it totals my policy amount? Does that mean I can only withdrawl the 332?

    1. Hi Rosi, typically you can withdraw or borrow up to about 90% of your total cash value. There is a guaranteed level of cash value, and your dividend additions have added to that. You’ll definitely want to contact the company to know your options. It also sounds like you have been reinvesting dividends, and it might make sense to take dividends as cash (or use them to reduce your premiums) for the time being. More on dividends here: https://prosperitythinkers.com/life-insurance-dividends/

  9. Hi,

    Thank you for this blog! I have two questions:

    1.) My whole life carrier has informed me I have enough dividends to not make any more premium payments if I wish, coining it, “paying up” the policy with my dividends. a.) I assume they mean I’ll be signing over my dividends to them and I would trade them for my payments? b.) If I go that route does the policy continue to earn additional dividends and if so, c.) have I also signed over ownership of those dividends as well?

    2.) Re. death benefits (apart from the previous question(s), when I die, I assume my beneficiaries are paid out both the death benefit and all the dividends I’ve earned, correct?

    Thanks again!

    1. Hi Ed, In response:
      1) No, you won’t be signing over dividends, but they will be paying premium (which will keep building cash value, so the policy still gets them, just slower growth since there would be no new money entering the policy. (If your goal is to build more cash value and you can pay the premium, then keep doing so. You can request an in force illustration for both ways–using dividends to pay premiums or keep paying premiums–and you’ll see the difference.) Yes, the policy can continue to earn additional dividends and no, you haven’t signed over ownership of those.

      2) Since every dividend increases the death benefit, yes, your beneficiaries do receive them. They are already in the new much larger death benefit/face value that has been growing every year since you purchased the policy. (Now, if by chance you have kept the dividends with the ins company to “accumulate at interest” they will be separate and additional from face value, but few people do that and we think it is better to either reinvest dividends into policy or take as cash/pay premiums when needed/wanted.)

      Hope that helps!

  10. I have 2 policy, 1 VUL has cash value $150,000 and 1 whole life policy cash value $6800. I am 59 years old and will be retiring in 4 years. What is the best way to use my cash value? I currently use cash value to pay the premium. I wanted to purchase the retirement home. Should I use the cash value to increase the face amount of death benefit or should I do partial withdrawal from cash to put down payment of the retirement home? Please advise

    1. You may be ahead by increasing your cash flow by annuitizing your cash value, then getting a mortgage on the home (paid for by the annuity), especially if there is additional income for you. And yes, either a partial withdrawal or a policy loan (provided you have cash value to repay it) can work for the down payment. If you have had the policies for some time and don’t wish to continue making premium payments, here are some strategies that can help with that: https://www.prosperitypeaks.com/tag/stop-making-payments/

      Hope that helps!

  11. This article had so many answers I’ve been looking for. I’ve been with NMFN since 2010 and steadily increasing (buying policies?) the whole time. Here’s my question:

    In 4.5 years our youngest of four will be done with undergrad and on her own. I will be 51 and the cash surrender value will approximately equal the balance on our mortgage ($285k). Thinking I should borrow against the policy, pay off the note and pay myself back over ten years. (Mortgage otherwise won’t be paid off until I’m 69).

    At 61 (which is when I want to “retire”) the loan against the policy will be paid off. Does the cash surrender value continue to increase during those ten years as long as I also keep paying my premium? According to the chart, in 14.5 years when I am 61 that figure is about $840k.

    Thanks!

    1. Some great questions! We don’t necessarily recommend paying off a mortgage early, as it is very efficient debt… typically low interest, and deductible if you itemize. If the interest on a policy loan is HIGHER than your mortgage interest, you could end up paying more in interest (or increasing your “housing” payment)–plus potentially losing tax advantages.

      As far as how a loan would affect the cash value, that would depend on the particulars of your policy. Typically your cash value will keep growing–though it could be impacted somewhat by the loan. (Your company should be able to tell you.)

      IF you were going to borrow against the policy, you would want to either better your cash flow or expand your asset base. We may have options that could help, but we would need to know more about you and your policy. And it’s possible the course you’re already on is a good one. There’s really no need to pay off a mortgage early as it rarely makes sense through an opportunity cost lens. Joe will reach out to see if you’d like to set up a conversation. Happy New Year!

    2. Smoe great questions! We don’t necessarily recommend paying off a mortgage early, as it is very efficient debt… typically low interest, and deductible if you itemize. If the interest on a policy loan is HIGHER than your mortgage interest, you could end up paying more in interest (or increasing your “housing” payment)–plus potentially losing tax advantages.

      As far as how a loan would affect the cash value, that would depend on the particulars of your policy. Typically your cash value will keep growing–though it could be impacted somewhat by the loan. (Your company should be able to tell you.)

      IF you were going to borrow against the policy, you would want to either better your cash flow or expand your asset base. We may have options that could help, but we would need to know more about you and your policy. And it’s possible the course you’re already on is a good one. There’s really no need to pay off a mortgage early as it rarely makes sense through an opportunity cost lens. Joe will reach out to see if you’d like to set up a conversation. Happy New Year!

  12. I’m considering withdrawing from my whole life policy but my advisor doesn’t recommend it…not sure I understand why?

    1. Hi Laura, it really all depends on your situation. Many advisors recommend that you borrow against your policy rather than withdraw. (That’s our preference, too… usually.) This is because once you take money “out” of the policy with a withdrawal, you can’t put it “back” as if it was a savings account. Withdrawing cash value will permanently “shrink” your policy cash value and death benefit. However, IF you can’t or don’t wish to pay back a policy loan, withdrawal can be the better option. Hope that helps!

  13. I took out a policy for my youngest son, who is an adult now and listed his minor children as beneficiaries along with my older son. I am in my 70’s and I would like to withdraw a little from his whole life policy, would that be possible without any of the beneficiaries having to sign off on it? Thank you.

    1. Hi Gloria, IF you are still the policy owner, you should be able to withdraw from or borrow against the cash value as you see fit. That’s one of the advantages of saving with whole life!

  14. I have 3 separate Universal Life policies with a total of $26000 outstanding loans with annual interest of about $2000.Current cash value totals around $62000 without loans. I am in mid 70,s. I was considering some options.
    One: continue to pay loan interest and let Cash value pay premiums ( 12275 /yr.)
    Two: pay off loan and partially withdraw from the increased cash value (62K plus 26k =88K) and continue premium payments.
    What would be the way to go to access some of the cash value .

    1. Hi Jack, I apologize, I just realized Kim sent me a reply some time ago, but I did not post it. her reply:

      “My initial reaction is borrow against the existing cash value, though doing that will lower or possibly put your death benefit in jeopardy… I’d love to know a few more facts about your other finances before a final recommendation.

      “Feel free to reach out to me via email at we*****@Pr****************.com

      Thanks!

  15. Both my husband and I have VUL policies we bought 20 yr ago. We are in our mid 40s and want to start withdrawing in our early 50s so we can retire early. We have retirement savings we can tap into starting age 60 (IRA, 401k), so we don’t want to keep paying for the VUL and don’t really need the death benefits once kids are independent. Should we borrow against VUL or just cash out altogether so we can use the money to supplement early retirement?

    1. Hi Jenny, First of all, I’ll really encourage you to re-think “retiring” as you could live another 50-60 years and that is a LONG time
      to make money work for you. (Many people underestimate the inflation they will experience and wish they had saved more!)

      That being said, if you feel you do have enough money saved/invested…the best way to make use of the VUL is to leave it alone and wait until you are older, then annuitize it for income. Borrowing against VUL is problematic due to fluctuating nature of the cash value. While the insurance company will take any collateralized funds and put them into a fixed account, the rest of your account is subject to the whims of the stock market. And, since it is “universal” and not Variable Whole Life, you have an increasing insurance cost inside the policy which can cause it to implode if too much borrowing is going on.

      I don’t like to recommend canceling Life Insurance, yet if you want to use the money to supplement income, that may be best.

      If you are looking for cash flow investments (now or in a few years), I may be able to help.
      Kim

  16. I was under the impression that you could only take a loan from a whole life policy. When you say you can take a withdrawal are you talking about withdrawing your dividends? In order to take money out from the total cash value wouldn’t you have to do that as a loan?

    1. Good question, Paul. While we recommend borrowing against your policy in many cases with a policy loan from the life insurance company (so that your principal keeps growing and your death benefit also remains maximized), you can ALSO always make a WITHDRAWAL instead. (After all, it’s YOUR cash value.)

      The advantage of a withdrawal is that you have no interest to pay; it’s not a loan and you don’t have to pay it back! The disadvantage is that you in effect “shrink” your policy when you make a withdrawal, because (unlike a loan or say a savings account), you can’t put money back “in” to a life insurance policy once removed. So you are lowering your cash value permanently (there will be no future dividends on the amount you withdraw) and the death benefit also “shrinks” accordingly.

      However, if paying a loan back would be a hardship, sometimes withdrawal is the right strategy!

  17. Hi
    I have 3 whole life insurance policies. I need some cash now. I have a couple of questions.

    Should I withdraw or take a loan from it.
    If taking loan should I distribute equally among 3 or take from just one

    Thanks

    1. Hi, check your life insurance loan interest rates, as your policies might have different interest rates. If you decide to borrow, one would be simpler. Use one with the lowest cost of money (if there is a difference), or consider borrowing from a bank using your policy as collateral. More at https://prosperitythinkers.com/collateral-assignment-banking-on-your-life-insurance-policy/

      If it would be difficult to pay back the loan, it is probably better to withdraw the money instead of borrowing it. (The exception would be if you are nearing life expectancy and you’re content to just let the loans be deducted from the death benefit.) Do be aware that life insurance withdrawals and potentially loans do have an impact on death benefit, especially if loans are not paid back in a timely manner. But that shouldn’t stop you from using your “living benefits” when you need to!

  18. My husband is 80 and has Alzheimer’s i am 74 have copd and other health issues. We have been married 55 yrs. We need a new roof or the whole roof is going to fall down. We have water leaking in a couple rooms. Mold is a very large possibility. We bought two policys in1995 and still have both one is a whole Life Insurance and the other is a variable life policy with annuities stocks? We got them from Prudential in 1995. We need money to fix the roof and other repairs. What is your advice about which one to get money from and how to get the money over the phone or what. We need the money now I guess we have no choice after all this is why we have insurance!! I hope someone can help me!

    1. Hi Betty,

      Yes, you can use a policy and get your roof fixed!

      Start w/ the whole life policy, borrow against it and/or withdraw. Call the insurance company directly to learn about your options.

      Try to leave the variable policy in place if possible, though you might ask the company if they can put the value into a fixed account so you don’t lose any if the stock market goes down.

      In addition to this article, also see “Collateral Assignment: Banking on Your Life Insurance Policy” https://prosperitythinkers.com/collateral-assignment-banking-on-your-life-insurance-policy/ as it could make sense to use your policy as collateral to borrow against at the bank. But in your situation, a withdrawal might be the best option, as you will have no payments to make.

      Hope that helps. Now go get that roof replaced! It’s exactly why you have “whole life”… it’s not just for beneficiaries, it has great living benefits, too 🙂

  19. Hello there! I have a quick question, is there such thing that you can get a policy loan immediately upon the purchase of a policy and use the building cash value as collateral? I am currently shopping for life insurance, but I also need a loan as soon as possible for some unexpected expenses that arised.

    1. Hi Mario, If you are “crunched for cash” right now it might make more sense to purchase a convertible term policy. You CAN use the policy’s cash value for collateral soon, but you’ll be putting more into the policy than you can remove for the first 2-3 years. So probably better if you start a whole life policy to pay monthly premium to reduce out of pocket, rather than paying annually then borrowing against. Hope that makes sense! Cash value grows slowly at first, although it will grow faster with a special rider.

      If you are still shopping, let us know if we can help. We sell whole life and convertible term, and we can also offer advice as well. Best way to start is to email we*****@pr****************.com or give us a call at (877) 889-3981 ext. 120.

      (And I apologize for this late reply! I consulted Kim on response but then the response didn’t make it back to you in a timely manner.)

  20. I’m 55yrs old, I have a $100,000 Universal Life policy since 2002 but when I tried to withdraw half of my cash value they told me “sorry, the policy is at the minimum death benefit” what does this mean?

    1. Hi Marie, it means the cash that is there is required to support the death benefit, and if it was withdrawn, then there would be no more death benefit. Sorry to be the bearer of bad news, but this is one reason we recommend whole life and not UL.

  21. First time anyone ever explained the value of Long Term Life Insurance to me. Basically. when you are young it is a source of cheaper loans and when you are older a source of cash to draw for emergencies. With the possibility of living longer, what age is too old to buy Long Time Life Insurance?

    1. Good question, Victoria! You can buy whole life insurance up to about age 85, though health could potentially play a factor. It works well in some situations such as converting assets from a taxable brokerage account to increase cash flow, and/or to increase the value of an estate for heirs. Read more in”Too Old for Life Insurance? The Surprising Truth About Seniors and Life Insurance” here: http://prosperitythinkers.com/too-old-for-life-insurance

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