Do you have a whole life insurance policy? One of the major benefits to a whole life insurance policy is that you can borrow against it once you have built a significant amount of equity. But that doesn't mean borrowing against your life insurance policy is always a good idea -- borrowing against your policy means that you reduce the amount of insurance that would be paid out in your estate.
1. When Purchasing a Home
Purchasing a home is an investment -- especially in a good real estate market. Since your home will be inherited by your family just as an insurance policy would pay out to them, purchasing a home can be a very wise decision. If you borrow against your whole life insurance policy, you can either borrow just your down payment or you can borrow the entire amount (depending on how much you have in your policy, of course). Either way, it can add financial stability to your life through the borrowing process.
2. When Sending a Child to College
Investing in your child's future is an excellent reason to borrow against your whole life insurance policy. If your child would need to take out student loans otherwise, borrowing against a whole life insurance policy can be more forgiving; you can take out a specific amount, you don't need to qualify for student loans and you will usually get either a comparable or lower interest rate.
3. When Paying Off Debt
Realistically, your debt will be paid out from your life insurance policy before any of your beneficiaries receive any money -- that is how inheritance generally works. Paying off debt with your whole life insurance policy early simply means that you will not need to worry about this debt. You can pay off high interest debt with your whole life insurance policy, thereby drastically reducing the amount of interest you would need to pay overall. This also consolidates your debt into a single payment.
4. When Purchasing a Vehicle
If you need a vehicle, borrowing from your whole life insurance policy can let you finance one at a lower interest rate than you would otherwise qualify for. You won't need to go through the loan application process and you can purchase a vehicle for any amount up to the maximum that you can borrow, regardless of your current income.
For more information about borrowing from your life insurance policy, you may want to contact your agent. Different insurance policies from places like Matt Roenker Insurance Agency may have specific requirements for when you can borrow and for how much you can borrow.