Can I Borrow Money Off of My Life Insurance?

If you have permanent life insurance, you may have the option to borrow money against your policy’s cash value. This can provide a source of funds in times of need. However, it’s important to understand that borrowing against a life insurance policy comes with risks and considerations. In this article, we’ll explore the concept of borrowing money off of your life insurance and what you need to know before making this decision.

Understanding Borrowing Against Life Insurance

Permanent life insurance policies, such as whole life or universal life, typically build cash value over time. This cash value is a portion of your premium payments that accumulates and grows within the policy. When you borrow against your life insurance policy, you essentially use the cash value as collateral to secure a loan.

The Benefits of Borrowing Against Life Insurance

There are a few potential benefits to borrowing money off of your life insurance:

  • Access to Funds: Borrowing against your life insurance policy allows you to access cash that has accumulated within the policy, providing you with a source of funds.
  • No Credit Check: Unlike traditional loans, borrowing against your life insurance typically doesn’t require a credit check because you’re essentially borrowing from yourself.
  • Low Interest Rates: Life insurance policy loans often have lower interest rates compared to other types of loans, making them an attractive option for those in need of quick cash.

Risks and Considerations

While borrowing against your life insurance policy can be beneficial, it’s important to be aware of the risks involved:

  • Reduced Death Benefit: When you borrow money off of your life insurance, the outstanding loan balance may reduce the death benefit that will be paid to your beneficiaries upon your passing. It’s crucial to repay the loan to ensure that your intended coverage amount is preserved.
  • Unpaid Loan Impact: If you’re unable to repay the loan, the unpaid balance may accrue interest, which could eventually lead to the exhaustion of your policy’s cash value and the termination of the policy itself.

How to Borrow Money Off of Your Life Insurance

If you’re considering borrowing money off of your life insurance, here are the general steps involved:

  1. Check your policy: Review your life insurance policy documents or contact your insurance provider to understand the borrowing provisions specific to your policy.
  2. Evaluate the cash value: Determine the available cash value within your policy, as this will determine the maximum amount you can borrow.
  3. Apply for a loan: Contact your insurance provider or agent to initiate the loan application process. They will guide you through the necessary paperwork and requirements.
  4. Understand loan terms: Once your loan is approved, carefully review the terms and conditions, including the interest rate, repayment schedule, and any associated fees.
  5. Repay the loan: Make regular loan repayments to your insurance provider according to the agreed-upon terms. This will help preserve your policy’s cash value and death benefit.


Borrowing money off of your life insurance policy can provide a valuable source of funds when needed. However, it’s important to weigh the benefits against the potential risks and implications on your policy. Before making any decisions, thoroughly review your policy documents, consult with your insurance provider or agent, and consider how borrowing against your life insurance aligns with your financial goals and needs.