Pay for that purchase with personal savings or by borrowing
against the cash value of the original policy, if any has accumulated.
Most insurers allow for the policy owner to take loans
against the cash value for any reason and without proof of a worthy credit history.
A surrender charge is a hold back amount that an insurer
charges against the cash values of a life insurance policy for the first 8 to 10 years, if funds are withdrawn early.
Any outstanding loans
against the cash value at the time of the policy holder's death are deducted from the face value of the policy.
You see, borrowing
against cash value life insurance is not a black and white issue — it's very much dependent on individual circumstances and goals.
Your child will then have the choice of keeping the policy, taking a loan
against the cash value if needed, or requesting a payout.
Another advantage of cash value life insurance is that the funds can be withdrawn in the form of a partial withdrawal or you can borrow
against your cash value through a policy loan.
If you decide to decrease the coverage, you must be aware of the fact that a decrease below the required minimum may lead to a surrender charge
applied against the cash value.
This is where the correctly - structured policy's benefit of underlying continued growth even when you've borrowed
against the cash value comes into play.
If a consumer, instead of
drawing against the cash value, decides to completely cash out their whole life insurance policy there may be significant surrender fees involved.
Keep in mind that a lower death benefit means your beneficiaries will receive less money upon your death, so don't take borrowing
against your cash value lightly.
The annual investment or management investment fees
charged against your cash value are designed to make sure the universal life insurance company is profitable even when their portfolios perform poorly.
Additionally, you can borrow money
against the cash value of your whole life insurance policy instead of taking out a loan elsewhere.
Having the ability to take out a tax free
loan against the cash value in your policy whenever you want for whatever reason is a gigantic benefit.
Another benefit is that the owner of the policy (either you or your child) can borrow
against the cash value portion of a permanent life insurance policy.
In contrast, many permanent life insurance policies allow you to borrow
against your cash value while you're alive (with some tax advantages) or the option to walk away from the policy and take the cash surrender value if you no longer need the insurance coverage.
Colonial Penn Guaranteed Issue policies do build cash value and can be borrowed against; however, Colonial Penn charges an 8 % interest rate on any loans
made against the cash value.
A death benefit that is growing over time as the cash value grows, blasting this
argument against cash value life insurance into oblivion.
Cash Value Life Insurance Tax There are tax advantages to permanent life insurance, as you can borrow
against the cash value without owing taxes, and your beneficiaries also will not owe taxes on receipts.
In whole life, you have to pay your premiums on time every month or year, and you can't miss or your policy will «borrow» the
premiums against the cash value, which you pay INTEREST on.