The Pros and Cons of Insurance Life Loans

Everyone gets stuck in financial crisis at one time and another and that includes even the rich and the famous. It just takes a heavier toll on the average Joe. Borrowing money from your insurance life policy can be tempting especially when you have been paying it for more than a decade or so. After all, this option is one of the things that lured you into buying. In fact, it might be the only thing you remembered of all the inclusions of your coverage. However, will making an insurance life loan a good suggestion? Below are the pros and cons.

Pros:

• You do not have to pay your loan back. –this may sound music to your ears but of course it has a catch. You can loan as much as the amount that you have accrued in your cash value. You have the option to pay and not to pay your carrier back. If you decide not to repay, the amount you borrowed will be taken away from the death benefit that your beneficiaries will get in the event that you meet your Maker. The choice is quite simple. It will be up to you how you would handle your finances.

• It provides you an easy solution. –if you have a policy that gives you that option, that will provide you an easy escape to your problem. You would not have to opt for financial institutions which will require you to do frustrating paperwork. It will save you the time especially if every minute is important and the hassle of providing collateral. However, this advantage has conditions too. If you only have a term life insurance policy, you will not be able to make a loan as it does not accrue cash value. You need to have a permanent life plans to be able to borrow.

Cons:

• You can lose your policy before you know it. –a loan is a loan and it has to be paid. One downfall of making an insurance life loan and not paying even the interest is that you can lose your plan; hence, all the money you have allotted to pay for the premiums all those years. This is because that unpaid interest will most likely to compound together with your loan amount. If you will neglect the payment, you will be faced with two options, either to pay it from your own money or through your policy. If you do not have sufficient funds, you may be left without other alternative but to sacrifice your plan.

• Your dividends will go down. –since permanent types of plans are being exposed to the market, they are considered as an investment. It is the same with whole life insurance online and other similar plans bought over the internet. This is the reason why plan holders receive a dividend apart from the cash value that their plan accrues. As long as you have the loan, your dividend is more likely to go down until you get nothing. Worse, this can drive up the amount you borrowed all the more. This is because the collateral will cease from being active in the market.

Things to keep in mind:

• Pay your loan back. –Even if you do not have to do this, paying your loan back from your own money is the best way to protect your insurance investments. Remember that the total quantity of premiums you have been paying is bigger than the amount you have just borrowed. It is definitely not worth it to lose everything especially if you have the means to pay your carrier back. The most important thing is to pay it in time. Late may be better than never but beating the deadline is the best. This way, the coverage of your family will not be lessened.

• Make it your last resort. –although your permanent life insurance plan can bail you out that easy, it will be best if you will make it your last alternative. See to it that you have exhausted all other efforts before opting to borrow from your insurance policy. Turn to your carrier only if it is your only card left. Better yet, have an emergency fund you can use for urgent matters.

On one side, looking at permanent life insurance quote on line and buying them has lots of advantages such as allowing you to borrow money in the future. However, you must remember that every privilege has a corresponding task you must do properly or suffer the consequences.

Article by David Livingston of EQuote, who is a specialist in everything life insurance. For more information on quotes life insurance and cheap term life insurance quotes, visit his site today.