Basics of a Life Insurance Loan
When you made the decision to take out an insurance policy on your own life, you did so with the idea that it would be there for the protection and security of your loved ones after your death. Unfortunately, sometimes the plans that we make when we are younger are rerouted by the things that life can present, and unexpected expenses can make the idea of borrowing against your life insurance policy very appealing.
Most people don’t even know that it is possible to take out a life insurance loan, but doing so can be a very good answer to a very bad situation. In many instances a life insurance loan is a much better option than taking out a loan from the bank or charging overwhelming expenses on a credit card, but it is important to understand all of the ramifications of doing so. Where a life insurance loan can offer benefits, it has some downsides too.
How Do Life Insurance Loans Work?
In order to understand how a life insurance loan works, you first need to understand that every cash value life insurance policy builds up a cash value over its life. When a life insurance policy’s cash value builds up high enough, you can borrow against it. Doing so has the advantages of meaning that you don’t have to go through a credit check and there are no questions asked and no lengthy or complicated application process. There’s generally just a form that needs to be filled out.
Loans against your life insurance policy have the advantage of not showing up on your credit report the way that a bank loan or credit card balance would, but they still need to be paid off. The good news is that the interest rate charged by your insurance company will likely be lower than what you would find in a bank loan, and much lower than the interest that your credit card company will charge on an unpaid balance. The life insurance company is also not likely to come after you – you can schedule repayments to them at your own convenience.
Disadvantages of a Life Insurance Loan
Though there are benefits to taking out a life insurance loan, there are also a few downsides that you need to be aware of. When you take out a loan against your life insurance policy, you reduce the benefit that is distributed to your beneficiaries upon your death. Depending on the type of loan you take out, you might also run the risk of losing your life insurance policy entirely if you do not repay the loan before the loan plus interest exceeds its cash value. However, with a life insurance loan from Fifth Season Financial, all life insurance loans are paid back by the policy, so your life insurance policy will always remain in tact.
A Different Kind of Life Insurance Loan
If the reason that you are considering taking out a life insurance loan is that you are facing an advanced illness, there is another way to get the benefits of a life insurance loan without the disadvantages. Fifth Season Financial offers what it calls Funds for Living, an innovative way of using your life insurance policy to give yourself the benefit of its value during your lifetime.
Fifth Season Financial’s application process is simple: in order to qualify you simply need to have been diagnosed with an advanced stage illness and have a life insurance policy with a value of at least $75,000. You can end up with as much as 60% of your policy’s death benefit with absolutely no restrictions placed on what you do with the money – you can use it to help with expenses, take a vacation, set up a college fund for a grandchild … whatever you’d like.
Best of all, your life insurance policy remains in place, you are no longer responsible for making policy payments, and the life insurance policy remains in place. In almost all cases, there are still life insurance funds that remain in the policy to pass on to your beneficiaries after you die.
If you are considering taking out a life insurance loan as a result of being diagnosed with an advanced stage illness, contact the professionals at Fifth Season Financial to learn more about their Funds for Living Program. It offers an excellent alternative to a traditional life insurance policy loan.