The cash surrender value of an insurance policy is basically the amount that can be availed of in case of cancellation of the policy. This normally applies to whole life policies that do not reach maturity for certain reasons. This will result in a cash payout to the insured individual equivalent to the value covered during the time of the insurance cancellation. When borrowing against the cash value of an insurance policy, you must be the owner of the particular policy. It also charges a very low interest rate, compared to other lending sources. The guidelines below can help facilitate the process of borrowing from your cash surrender value:
- Study the last annual statement of the company where your insurance policy is being serviced from. From here, you will be able to find out how much the cash value of your policy is. Try to limit your loan to a maximum of 90 % of the amount of your cash value.
- Get the number of your policy’s contract that you will find either on your annual statement or on your policy’s title page. Get in touch with your insurance company office earlier in the day on regular business hours.
- Talk to a customer service representative and express your intention to avail of a loan against your policy. You must give the contract number of your policy as well.
- Find out the exact amount of your policy’s cash value from the service representative and specify the amount you would like to loan. Get the details of the date you can expect to receive your check. Make sure that you note down the date.
- Always make sure to document any transactions you make. Get information regarding the customer service representative you are dealing with, like his name and contact numbers. That way, it will be easier to deal with any problems in case untoward situations arise.
- When using your life policy as collateral to secure a loan, the current cash surrender value of the insurance policy is taken into consideration. In essence, the lender utilizes this number as the usable value of the asset. Using cash surrender value as guarantee for a loan can assure the lender of recovering the amount borrowed even if the debtor may fail in payments for any reason.
One of the many advantages of insurance policies is its capacity to increase its cash value through the years. For as long as the policy is in effect, the value continues to increase. This makes it possible to apply for a loan against this value, or make use of your policy as a guarantee or collateral when trying to avail of a loan.
These are tough times and needs arise that you may not be prepared for. Before making that step though, try to consider more options first. Your insurance policy is very important and borrowing carries with it a lot of disadvantages as well. You must make sure that what you are borrowing it from is worth it.