My loan exceeds the cash

Posted: Wed May 05, 2010 08:28 pm Post Subject:

have you called the company or agent? they can give you the best advice. states, companies, and policies are all a bit different.

here's the general answer on whole life policies to give you some insight and something to think about. It's always a good idea to sit down with a local agent to discuss the finer details before making a decision.

ok, so if i understand correctly, you took a loan against the cash value of the life policy? what now happens is if you die they subtract the loan and interest due from the death benefit. If you decide to pay it back and keep the policy, no money would be deducted from the death benefit.

also...if you choose, you can keep paying the policy and never pay it back, just the loan and interest accrued will be taken out of the death benefit when you die. or, if you no longer have a need for life insurance, you can "cash in" the policy. This would give you the remaining cash left in the policy and cancel loan and the death benefit. you would not have to repay the loan becuase its no longer a loan, it would be considered cashing in or surrendering the policy. its only a loan if you want to keep the policy and how it eaffects the death benefit.

be sure you want to cash it in though...you are now 65yrs old and a new policy for the same coverage would be atronomical compared to when you bought that one at age 28. there may be some additional options for you, I emplore you to sit down with a local agent or advisor prior to making a final decision to surrender the policy.

hope this is helpful, good luck to you

Posted: Wed May 05, 2010 08:34 pm Post Subject:

quick point, this only applies to a whole life policy.

there are other permanent policies, ie universal life, that the cash value is designed to carry the policy. yes, you can cash it in and you can borrow from it, but if you dont pay the loan back, it can self surrender if there isnt enough cash to offset the increasing cost of insurance. The premium stays level b/c of the cash accumulation...if not enough cash, the premium rises and/or the policy surrenders itself.

its important to understand what kind of life insurance policy you have. they all have a place and are great products if properly structured.