Using Life Insurance as collateral for loans

[The_Honourable]

Does anybody have experience doing this? If so, what are the procedures, pros and cons for doing so?

Thanks!

[hyperdude]

only pros bro
no cons unless u plan to skip the country....
life insurance insures your loan is paid in case of accental death
or in case of injure and cannot work
yuh know...

[rfari]

The policy should have a cash value. This is shown on the statement when requested from the the insurance company

[nismoid]

Depending on the type of loan, the Bank will ask for particular types of Life Insurance policies be it short term loan or a mortgage etc. However it will work better for you in if you have a policy that attracts a cash value to it

[*$kїđž!™]

This hardly ever works...banks are reluctant to use this...and rarely do....

[ruffneck_12]

in a way, yuh literally using your own life as collateral

[*$kїđž!™]

its not gonna happen////

[The_Honourable]

its not gonna happen////

Why not?

[rfari]

This hardly ever works...banks are reluctant to use this...and rarely do....

Which bank is that. Afaik, once its unencumbered, the bank will use the cash value

[*$kїđž!™]

This hardly ever works...banks are reluctant to use this...and rarely do....

Which bank is that. Afaik, once its unencumbered, the bank will use the cash value

do you know how long it takes for your policy to acquire substantial cash value to be used as collateral for a good enough loan?......say for property purchase....???

[rfari]

This hardly ever works...banks are reluctant to use this...and rarely do....

Which bank is that. Afaik, once its unencumbered, the bank will use the cash value

do you know how long it takes for your policy to acquire substantial cash value to be used as collateral for a good enough loan?......say for property purchase....???

Depends on the premium and how long it had been running. We not talking about 100k policies that we start 3 years ago eh. And yup I understand where u coming from. Just providing answers for OP question

[The_Honourable]

The policy should have a cash value. This is shown on the statement when requested from the the insurance company

So i have to request a cash value on my insurance policy before moving forward correct? This is not the insured value?

This hardly ever works...banks are reluctant to use this...and rarely do....

Which bank is that. Afaik, once its unencumbered, the bank will use the cash value

do you know how long it takes for your policy to acquire substantial cash value to be used as collateral for a good enough loan?......say for property purchase....???

Depends on the premium and how long it had been running. We not talking about 100k policies that we start 3 years ago eh. And yup I understand where u coming from. Just providing answers for OP question

Bit lost here. The insurance policy have to be running for X amount of years before you think about using it as collateral?

[rfari]

The cash value is about the equivalent of the total premiums paid. Not the coverage value.
Lets say u have a life policy with a 100k coverage and u paid a premium of 100$/mth for the last 10 years. The cash value will be about 12k and not 100k.
If im mistaken, tuner will sort it out. Otherwise talk to the agent and the bank to be on the safe side

[The_Honourable]

The cash value is about the equivalent of the total premiums paid. Not the coverage value.
Lets say u have a life policy with a 100k coverage and u paid a premium of 100$/mth for the last 10 years. The cash value will be about 12k and not 100k.
If im mistaken, tuner will sort it out. Otherwise talk to the agent and the bank to be on the safe side

ohhh i see. Learn something new there. If that is the case, then i have to wait a good amount of years. By that time, if I have a wife and children I would not want that policy tied up to anything. Yeah i will talk to my agent about it. Thank you rfari.

[SMc]

If the banks use a life insurance policy a collateral I think somthing is wrong with them. I can understand them stipulating that for loans over a certain value that you must have life insurance as a prerequisite but not as for collateral use.

To my understanding you pay life insurance monthly, and if you dont pay then the policy will lapse or basically not pay out if you deads are not up to date. What happens if you stop paying your premium for life insurance, how is the bank going to use the policy as collateral in that case?

[toybago]

Yes this can has been done. As stated before the bank considers the cash value already earned on the policy i think. I did this years ago so the specifics a lil hazy.....OP go in and talk to a loan officer at your bank nah

[rfari]

If the banks use a life insurance policy a collateral I think somthing is wrong with them. I can understand them stipulating that for loans over a certain value that you must have life insurance as a prerequisite but not as for collateral use.

To my understanding you pay life insurance monthly, and if you dont pay then the policy will lapse or basically not pay out if you deads are not up to date. What happens if you stop paying your premium for life insurance, how is the bank going to use the policy as collateral in that case?

its not the coverage value that the bank will consider in OP's case but the amount that has been paid (premiums) since inception.

[still tippin']

Banks and Credit Unions do assign a lot of life insurance policies especially RBL. It is not just based on the cash value as they do assign policies like 'Term Life' (which most people take out for mortgage purposes and because the premium is lower than whole life insurance) and which does not carry a cash value (could vary by insurance companies). Banks also assign policies in there very early stages before they even start to build any significant cash value.

Once the bank assigns a policy they become the owner of said policy and would be notified when you the payor have lapsed in your premium payments (if you paying through another source and you ducking the payments e.g. cash) but most times the bank will make sure the deductions are coming through your account with them so they have more control in making sure the policy does not lapse or go into arrears. Credit Unions may be a bit more lenient with that. I'm sure there are other things in your agreement with the bank that will cover them if you try to drain your account and go into hiding but I guess they feel safe that premiums will be paid. However the main thing may be that if you die the coverage amount will be paid out to them to cover the balance of the loan and any excess will be given to the beneficiary.

So go in and talk to the bank. What is assigned to them is in their control not so much the insurance company.

[cinco]

What banks dont tell you is the life insurance policy can be used in lieu of the insurance the bank has to take on the policy in case you die.
So instead of paying the 5000 or watever on the loanbfo seperate insurance u can use the policy for coverage once it is sufficient to cover the loan

[dougla_boy]

This hardly ever works...banks are reluctant to use this...and rarely do....

Which bank is that. Afaik, once its unencumbered, the bank will use the cash value

do you know how long it takes for your policy to acquire substantial cash value to be used as collateral for a good enough loan?......say for property purchase....???

dan....wah insurance company u with? cuz yuh agent is a waste if they never explained in detail wah yuh get urself into......

speak to an insurance agent........and doh fraid to ask questions........

[*$kїđž!™]

I was being sacarstic dougla boy.. I know how it works.....good advice rfari...

[dougla_boy]

use ur sarcastic tags next time nuh

[xr8id1968]

One thing to note, if you have a named beneficiary on the policy, that person has to give permission to use the policy as collateral. If the named beneficiary is under the age of 18, then you have to wait until they are of age (over 18) to give consent.