Most cash value life insurance policies allow for loans by the
policy owner even if it is "paid off".
Whether the policy is paid off or not is less important. What is
important is the current cash surrender value of the policy,
available loan amount, interest rate on said loan, type of policy
you own, and your future plans to either pay back the loan or
not.
Where some folks run into issues is when they borrow from a
policy without the ability or thought to pay back the loan.
Generally, when you borrow against your life insurance policy it
will reduce your cash surrender value as well as the current death
benefit. You will also begin to be charged an interest rate on your
loan that should you not pay will accrue and further reduce your
death benefit and cash values or at least slow down the growth of
your cash value and death benefits. If the loan isn't substantial
and you have enough cash value in reserve this may not pose a long
term issue. But, if ignored for too long the cash value may be
depleted rendering your life insurance obsolete due to a lapse for
insufficient value. And, to make matters worse may produce a
taxable event to the policy owner.
So, Can you borrow from a paid up life insurance policy?
Generally, yes. But it obviously depends. You should be able to
request an "in-force illustration" from your life insurance
agent/carrier illustrating the impact of a loan based on if you pay
it back or not. This is a simplified answer but generally yes you
have the option to borrow from a policy IF there is value to borrow
against and IF that carrier will allow it. Is it wise to borrow is
another question.
Related Q&A：
：Can you borrow from a insurance policy that the premium is paid off？-Well, typically, it depends on the specific terms and conditions of the insurance policy. In some cases, if the premiums are fully paid off and the policy allows for borrowing, then you might be able to do so. But you gotta be real careful here. You need to read the fine print and understand all the rules and potential consequences. Sometimes, borrowing from an insurance policy isn't the best idea because it could affect your coverage or have other negative impacts. So, it's not a simple yes or no answer. Ya know what I mean?
