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Subject:  Re: whole life insurance Date:  8/16/1997  1:16 PM
Author:  TMFPixy Number:  180 of 90523

Greetings, Ryan, and welcome to Fooldom.

<<Does anyone understand the concept of 'borrowing' money from the cash value of my whole life policy and then not having to pay it back? Is there is some sort of interest charge I would have to pay for 'borrowing' my own money?

I would get rid of the damn thing but my wife would kill me (her father sold me the policy). Little did I know three years ago what a STUPID and Wise thing that was. Take my advice: Buy term insurance and invest the difference!!! >>

When you borrow against the cash value of an insurance policy there will be interest charged against the outstanding balance. If you fail to repay the loan and/or the interest, two things will happen. First, the interest due each year will either be charged against the remaining cash value in the policy or it will be added to the outstanding loan balance, thus increasing the principal loan amount against which interest will be charged in the following year. Second, on your death the outstanding principal balance and accumulated interest will be deducted from the face value proceeds before that amount is paid to your beneficiary.

IMHO it's far better to cash in the policy instead of taking a loan which you don't intend to repay, particularly if you're also going to let the interest remain unpaid. Just one Fool's thoughts for what they're worth.


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