How to borrow loans against Life insurance policy

Whenever life insurance policy holder need quick cash to offset emergency bills they can borrow from their whole life policy which is  more expensive type of life insurance compare to others like Term life insurance,  more cheaper and suitable option for many people, but it doesn’t have a cash value and expires at the end of the term.

Taking out a policy loan, you need to understand this few tips before and after borrowing against your life insurance policy that in a whole life insurance policy, there is cash value accumulated, then you have the opportunity to borrow against the policy.

life insurance collateral loans can be a great solution if you need money quickly, such as for an emergency medical expense. Alternatively, they can be used as a stop-gap if you’re applying for a loan elsewhere, taking a long time to be approved.

Read: Six different types of car insurance Coverage to protect against losses

The policy normally has Low interest rate,Flexibility in repayment terms,No qualifications to borrow, you Can borrow for any reason and No tax implications when you borrow from your life insurance policy.

However, you should beware that when you don’t pay on time, it has impacts on your policy death benefit and you  pay additional premiums when Accessing the cash value to keep the policy in place.

How to borrow loans against Life insurance policyA policy loan is just like any other type of loan in that until it is repaid, interest will accrue; and if the interest is not paid, it will be added to your loan balance, increasing the amount you owe.

What is a Life Insurance Loan

Life Insurance Loan allow policy holders to take loan against a term policy base on a permanent or whole life insurance policy. Policy loans are borrowed against the death benefit, and the insurance company uses the policy as collateral for the loan.

A loan against life insurance could be a good alternative to running up a credit card balance or paying exorbitant interest on a personal loan.

You should approach any loan from your life insurance company carefully and Keep an eye on the accrued interest, you should Set your own schedule for repaying the loan

Life insurance loans have no underwriting requirements and little to no paperwork to fill out. This is because you’re borrowing against your own money instead of using someone else’s.

Also read:  Common Life Insurance Policy Terms, definition and Types


There is no set time for paying back the loan, which is a requirement in other types of loans. However, if you don’t pay the insurance company their interest annually, which can be variable or fixed, that interest payment is going to be included in your borrowed loan amount.

What Amount Can You Borrow Against a Life Insurance Policy?

The amount policy holder can borrow against a life insurance policy will depend on the insurance company. The maximum loan amount for a policy is generally 90% of the total cash value without a minimum amount.

You can also read: List of Banks in Nigeria that offer easy-to-get Auto loans

If you get a loan from an insurance policy, you won’t be removing any money from your account’s cash value. You can use the cash value as a guarantee and taking money from the insurance company.

You’ll have to think about compounding interest if your loan exceeds several years. If the total amount of the loan becomes as largess your insurance policy’s cash value, you will lose your policy.


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