The short answer to your question is, yes. The long answer requires some more explanation. You may need the cash right now. Borrowing on the face value does offer a quick solution. However, there are a few things you need to know.
- Your whole life policy has a face value and a cash value. The money you put in has to increase beyond the actual death benefit before you can borrow on it. The tax-free portion is what you can cash in. This is the part that confuses a lot of people. The cash you are borrowing is not taken from your death benefit. You are borrowing against it. The insurance company is going to use your policy as collateral for the loan you are taking out.
- The money you take out is not going to affect your credit score. You do not need pre-approval to do it because you are borrowing from your own pocket. The only downside is that you do need to pay back every penny of the cash you borrow, including the interest. Yes, you are going to have interest.
What happens if you let the policy lapse?
That does happen to people whether they mean to or not. You are going to pay taxes on the money you borrow from the cash value. Say you do not pay back the money you took from the cash value. That money is taken from the death benefit to pay any outstanding debts. That is going to lessen the money your beneficiaries receive when you die.
It is important to not let it get that far. Borrow from the face value of your whole life insurance policy and then pay it back as soon as you can. Speak with your insurance agent to find out more details. Every whole life insurance policy is different. The basics remain the same though.