Life Insurance for Debt Reduction
How can you pay off debt with the help of insurance policies?
If you’re willing to pay off debt, but you cannot afford the monthly payments or enroll in a debt relief program, you may consider applying for a loan against your insurance policy. For instance, you can borrow against the whole life insurance policy or cash in your endowment policy and use the amount to get rid of your bills.
How can a life insurance policy help you pay off debt?
Whole life insurance coverage offers guaranteed death benefits and provides the facility of accumulating cash value. You are required to pay a fixed premium throughout your lifetime. The expense charges do not reduce the accumulated cash value. So, if you wish to pay off debt, you can borrow against the cash value of your whole life coverage.
What are the advantages of borrowing against life insurance?
When you borrow against the cash value of your life insurance policy to pay off debt, it has the following advantages:
However, you must keep in mind that in case you die before repaying the borrowed amount, the beneficiary will be paid after deducting the outstanding balance plus interest from the face value of the policy.
Before borrowing against your insurance policy, you must determine the policy's approximate cash value with the help of the last annual statement from the insurance company. You must ask your insurer how much of that amount you can borrow and when you can get the required amount. This will help you plan out and pay off debt effectively.