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When to Borrow Against Cash-Value Life Insurance

Written by: MJ Gissas

We say it again and again: life insurance is just as much an investment tool as it is protection for your family in the event of death. As a permanent life insurance policy with a savings component, cash-value life insurance is perfect as a source for cash when in need, a means of paying insurance premiums, or as a source of loans.

Because the cash value of the policy increases over time, the risk to the insurance company is offset in direct relationship to the policy’s growth. That gives you greater flexibility once the value of your loan has reached a certain point. For most, that’s around the 10th year of a matured policy.


Borrowing against your cash-value life insurance means that you’re borrowing from the insurance company using the accumulated cash value of your policy as collateral. In the event you’re unable to pay back your loan, the insurer can simply collect on your matured life insurance policy.

But borrowing against your policy isn’t always the best idea. There are certain situations in which it is advantageous, including the following:


When You Need to Forego a Credit Check

Credit falters for all kinds of reasons, and sometimes it’s utterly unpredictable. Usual and unusual life events may affect your credit score, such as:

  • Identity theft
  • Hard credit checks
  • Recent high-value purchases or opened accounts


If your credit score is unable to meet the requirements for achieving the loan size you need, you can skip the credit check, fill out a form with your insurer, and receive your funds. Plus, since the loan won’t appear on your credit report, it won’t slow your credit rebuilding timeline down.

When You Want Repayment Flexibility

Again, since the insurer is also your lender, they have reliable collateral against which they can hand money over to you. You can choose to repay on your own schedule or according to the schedule set forth by your lender, but the insurance company may collect on your cash value if you fail to pay before someone claims your death benefit.

When You Need a Low-Interest Loan

There has to be a balance when dealing in loans; lenders are constantly finding ways to mitigate risk and maximize reward. In the case of cash-value life insurance, they do so by limiting loan payout, but they balance it with interest rates are significantly lower than other personal loans.

Low-interest loans borrowed against your life insurance policy’s cash value are helpful for for post-retirement purchases that you may not be able to afford right away. You may also be interested in buying additional coverage to increase your death benefit, and you can do so with the extra accumulated cash value of your current policy.

When You Can’t Make the Premium

It can be a scary thing when your life insurance is under threat of cancellation. Fortunately, the cash value built into permanent life insurance is available to help bridge financial gaps post-maturity. As long as you can pay premiums up to the point that your policy has matured enough to stand as collateral, you can rest assured that your death benefit is likely to pay out.

Just as the insurer does, you must remember to balance risk with reward. Consider your and your family’s interests when borrowing against cash-value life insurance. Need help? Americans for Life is available to guide you through cash-value life insurance and its benefits – talk to us today!

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Americans for Life Financial Services offers retirement solutions for institutional investors and individuals. Knowledge and results help our clients make informed decisions to meet their financial goals. 

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Southington, CT 06489

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