Should You Borrow Against A Life Insurance Policy?
Life insurance has an obvious primary purpose. But if you opt for whole life insurance, variable life insurance, or universal life insurance—varieties of what often is known as permanent life insurance—as opposed to choosing a term policy, part of your premium payments will build cash value in the policy, and you can borrow against that value. You might need money to help pay an emergency medical expense, buy a home, or even send a child to college. Once your financial situation improves, you can pay back the loan.
Reduced dividends. By borrowing from the cash value, you limit the amount of dividends that your insurance company may pay to its policyholders.
Increased costs. In some cases, a decrease in cash accumulation in a policy could lead to higher costs for you. That may be especially likely if you borrow against a universal life insurance policy.
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