Borrowing Against a Cash Value Life Policy

With a cash value insurance policy, the part of the premium that is not used for the cost of insurance may be invested by the insurance company and build cash value that you could use in a variety of ways. For example:

  • You may borrow against a policy’s cash value by taking a policy loan. If you don’t pay back the loan and the interest on it while the policy is in force, the amount you owe will be subtracted from the benefits when you die.
  • You could use your cash value to keep insurance protection for a limited time, or with a whole life policy, you could buy a reduced amount of coverage without having to pay more premiums.
  • You could use the cash value to increase your income in retirement or to help pay for needs such as a child’s tuition without canceling the policy. However, to build up this cash value, you must pay higher premiums in the earlier years of the policy.

Keep in Mind

While you can keep the loan outstanding as long as your policy is force, the loan interest will accrue and be added to the loan balance. If the loan value exceeds the account value, then the policy will lapse.

Withdrawals are subject to contingent deferred sales charges and may also include additional fees. Withdrawals will permanently lower the death benefit at the time of the withdrawal.

Seek Advice

So how do you get the loan? How long does the process take? How can you get more information about the loans or withdrawal provisions? Contact your local ERIE Agent to talk about these details. As licensed insurance professionals, Agents can advise you about the coverage options that best match your needs. Think of your Agent as your advocate in all things insurance.

1Life insurance and annuity products are not available in New York. Refer to our Disclaimer for additional information

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