Founder, Abrams Insurance Solutions, Inc., San Diego, CA
You can borrow from whole life, universal life, indexed universal life, and variable universal life policies. These are the types of policy that can accumulate cash - basically all policy types except term life insurance. It is an easy process - just call up the insurance company and ask them to send you a check or wire the money. To borrow money from your policy, you must have sufficient money in your cash surrender account and be sure not to borrow too much or the policy may lapse.
Permanent life insurance has two products that accumulate cash values: Participating whole life insurance and universal life insurance.
Borrowing from participating whole life insurance has two types of policy loans that charge interest: spread loans and direct recognition loans. But before you borrow via loans that will cost you money, take the dividends up to your basis (your contributions) free of charges.
Universal life (UL) has three cash value accumulating contracts: Current Assumption Interest Rate UL, Indexed UL and Variable UL. There are four different policy loan provisions that most UL use. Zero net cost loans, wash loans, spread loans and participating loans. But before you borrow via loans that will cost you money, take your basis first (your contributions) free of charges. But be advised taking basis first could trigger an ordinary income tax event for policies dated after June 21, 1988. Consult your tax adviser before moving forward accessing you policy using withdrawals.
One last thought: Policy loans are not treated as taxable income providing that the policy is kept in force for the life of the insured, i.e. until the insured dies. If the policy is surrender or lapses out of coverage, an ordinary income tax event will occur for policy loans received and internal policy loans that have accumulated. Consult your tax adviser before surrendering or allowing your policy to lapse.
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Borrowing from participating whole life insurance has two types of policy loans that charge interest: spread loans and direct recognition loans. But before you borrow via loans that will cost you money, take the dividends up to your basis (your contributions) free of charges.
Universal life (UL) has three cash value accumulating contracts: Current Assumption Interest Rate UL, Indexed UL and Variable UL. There are four different policy loan provisions that most UL use. Zero net cost loans, wash loans, spread loans and participating loans. But before you borrow via loans that will cost you money, take your basis first (your contributions) free of charges. But be advised taking basis first could trigger an ordinary income tax event for policies dated after June 21, 1988. Consult your tax adviser before moving forward accessing you policy using withdrawals.
One last thought: Policy loans are not treated as taxable income providing that the policy is kept in force for the life of the insured, i.e. until the insured dies. If the policy is surrender or lapses out of coverage, an ordinary income tax event will occur for policy loans received and internal policy loans that have accumulated. Consult your tax adviser before surrendering or allowing your policy to lapse.