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Can you borrow money using term life insurance as collateral? I'm considering taking out a loan and I want to know if I can use my term life insurance policy as security.
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Yes, it is possible to borrow against a term life insurance policy. Term life insurance policies do not have a cash value component like permanent life insurance policies, but some insurance companies offer a feature called 'term life insurance with a return of premium' or 'term life insurance with a cash value rider.' These policies allow policyholders to accumulate cash value over time, which can be borrowed against. However, it's important to note that borrowing against a term life insurance policy may have certain limitations and conditions. The amount you can borrow is typically limited to a percentage of the policy's cash value, and interest may be charged on the loan. Additionally, if the loan is not repaid, it can reduce the death benefit that would be paid out to your beneficiaries. It's recommended to consult with your insurance provider or financial advisor to understand the specific terms and conditions of borrowing against your term life insurance policy.
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