Not many of us fully understand our life insurance policies, and often times this can lead to questions such as “Am I allowed to borrow from my policy?” It’s an understandable question – after all, your life insurance is there should things go wrong, right? Well, the good news is that you are allowed – under certain conditions – to take loans or withdrawals from your policy. In this blog post, William Schantz will be talking about precisely what those conditions are and the implications of taking out money from your policy. So if you’re looking for more information on when it’s okay to borrow from your life insurance plan, then keep reading!
William Schantz Lists Times It’s Okay to Borrow From Your Life Insurance Policy
1. Paying for Education: According to William Schantz, borrowing from a life insurance policy can be beneficial for those who need funds to pay for higher education or training. You may have planned ahead and invested in a policy that was specifically designed with educational expenses in mind, such as CollegeAmerica from American Funds. This type of policy allows you to borrow up to the total cash value of your life insurance policy at any time without having to make payments or incur any interest charges. According to The College Board, the average cost of tuition and fees for the 2017–2018 school year was $34,740 at private colleges, $9,970 for state residents at public colleges, and $25,620 for out-of-state residents attending public universities. Data from the U.S. Department of Education shows that in 2018–2019, a typical full-time undergraduate student paid $1,230 for books and supplies. With the costs of higher education continuing to rise each year, borrowing from your life insurance policy can give you access to funds when you need them most.
2. Major Home Repairs: Another time it may be beneficial to borrow from a life insurance policy is if you are facing major home repairs or renovations which aren’t covered by homeowners insurance. According to the US Census Bureau, property repairs and improvements cost an average of $3,500 per household every year, with some projects costing as much as tens of thousands of dollars. Borrowing against your life insurance policy can give you peace of mind knowing that the funds are available to cover necessary repairs.
3. Paying Off Debt: If you find yourself in financial hardship and have debt, borrowing from a life insurance policy can be beneficial for those who need quick access to funds without taking out a loan or going into more debt. A survey by The Ascent found that American households with credit card debt owe an average of $7,000, and 24% of Americans say they don’t plan on ever paying off their credit cards — making it difficult to dig out of debt. By borrowing money from your life insurance policy, you may be able to get ahead before interest rates increase even further or major changes occur that could harm your finances.
4. Starting a Business: According to William Schantz, for those who want to start a business, borrowing from a life insurance policy can help provide the funds needed to get it off the ground. According to the U.S. Small Business Administration, startup costs for small businesses in the United States range anywhere from $5,000 to $10,000 on average. Borrowing against your life insurance policy allows you to pay for capital expenses as well as other overhead costs associated with launching a new business without having to take out a loan or make payments over time.
William Schantz’s Concluding Thoughts
One example of this, as per William Schantz, is entrepreneur Edward Knight who founded his own technology company after borrowing against his life insurance policy and investing it into his venture. After two years of hard work, Knight’s business was successful, and he was able to pay back the loan and keep his policy intact. This goes to show that with the right combination of hard work and financial planning, borrowing from a life insurance policy can be beneficial for those who want to pursue their goals.