Finance Quick Answers
Should you borrow against the cash value of a permanent life insurance policy?
Insurance sales representatives will often cite the
ability to borrow against a permanent life insurance
policy's cash value as a positive. People who purchase
such policies with the intent to borrow against them,
however, are really planning to borrow from their own
beneficiaries. The death benefit is reduced for
beneficiaries if there is a loan outstanding against the
policy. This is counter to the very idea of life
insurance - which is to provide protection for your
survivors if you die. In general, borrow against a cash
value policy only as a last resort.
Brenda Procter, M.S., Consumer and Family Economics, College of Human Environmental Sciences, University of Missouri-Columbia
If you'd like to learn more about this and other personal finance topics, the University of Missouri offers 'Personal & Family Finance,' a correspondence course, through the Center for Distance and Independent Study (800-609-3727). Information about this course is available at http://cdis.missouri.edu/CourseInfo/DetailCourseInfo.asp?1985.
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Last update: Monday, July 21, 2008
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