A benefit to purchasing permanent life insurance is that by the time the policy is five years old it begins to build up cash value. Permanent life insurance includes whole life, universal, variable or variable universal insurance. Once a permanent policy has cash value, you can borrow against it by taking out a direct loan or by using the policy as a loan guarantee. Borrowing against your life insurance reduces the death benefit until and unless you repay the loan and any interest charged.
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Direct Loan Method
Contact your life insurance company by phone or by logging into your account on the company website. Some companies may allow loan requests by phone and others will require you to fill out an application form.
Provide the required information. Your insurance company will need personal information, policy numbers and the amount you want to borrow. If you do not want income tax withheld from the loan, you must specify this directly. Make sure to sign and date paper applications.
Submit a paper application by fax or mail.
Loan Guarantee Method
Contact your lender for a secured loan application and life insurance company to get an assignment of insurance form. The assignment of insurance will give the lender a legal interest in the cash value of your life insurance policy.
Fill out the loan application and assignment of insurance form. The assignment of insurance form requires personal information, policy information and a signature.
Submit all required paperwork.