Interest on a Loan from a Variable Life Insurance Policy

Q. How much interest do I pay to take a loan from a variable life insurance policy?

A. Just like other types of permanent life insurance policies, you can take a loan from the cash value of a variable life insurance policy. Depending on the issuing insurance company, you could take a loan of up to 90 percent of the cash value that is in the policy.

Because the loan will reduce the amount of available cash value in the policy, however, it will also reduce the amount of death benefit. While taking a loan is not considered to be a taxable event, you will be charged interest on the amount that you borrow. This interest rate may be either fixed or fluctuating. Typically, the insurance company will charge interest on loans at a rate that is a few percentage points higher than the return you receive in the policy’s fixed account.

Related topics:

The Advantages and Drawbacks of Variable Life Insurance
Borrowing Funds from a Cash Value Life Insurance Policy
Borrowing Life Insurance Policy Loans

About Jack D. Davis at InsuranceScored.com
About Jack D. Davis at InsuranceScored.com

Jack D DavisBorn and raised in a quiet suburb of Philadelphia, PA, the youngest of nine children, son of two wonderful parents, Jack developed his work ethic early on. While attending West Chester University, he volunteered to join the US Army Reserves for a six-year enlistment. Attending college during the day, working evenings, and fulfilling his military obligation on various weekends, Jack learned the value of hard work and time management. After graduating from college (BS in Business Management), he began working as a sales representative for a Fortune 100 company and honed his marketing skills. In 1985 Jack started his financial planning career as an agent with Mutual Benefit Life.  After Mutual Benefit Life ran into financial difficulties, Jack decided to “go it alone”. His company, “Eagles Soar Enterprises, LLC.” successfully grew for almost 30 years. Jack’s skill-set is understanding and recognizing the personal needs of families and business owners. His patience in explaining the numerous options available is greatly appreciated by his clients. Jack agrees that life insurance is a difficult topic and people are rarely “excited” about discussing the subject. When Jack was 23 he witnessed firsthand how important life insurance is when he lost his Dad to cancer. Jack’s Mom used the life insurance proceeds to help minimize the financial loss.  Jack recognizes how critically important proper insurance planning is to the surviving spouse, business partner and, most importantly, the children of his clients. In his free time Jack enjoys playing tennis, horseshoes, ping pong, exercising, reading and attending Philadelphia Eagles football games. Jack has two wonderful children and currently resides in beautiful St. Petersburg, FL. Questions? Call Jack at 1.800.277.3098 or email: info@jackddavis.com

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