If you own a Uniformed Services Benefit Association® (USBA®) Group Whole Life Insurance policy, you may have the option to borrow against the accumulated cash value. This financial option can provide flexibility when you need funds for an unexpected expense or opportunity. However, it is essential to understand how this works, the terms, and the potential impact on your policy.
Understanding Whole Life Insurance and Cash Value
Most whole life insurance differs from term life insurance in that it provides lifetime coverage and builds cash value over time. The cash value accumulates as you continue making premium payments. This feature makes whole life insurance a valuable financial tool, as it offers policyholders liquidity options, including the ability to borrow against the accumulated cash value.
How a Loan Works on Your USBA Group Whole Life Policy and Things to Consider Before Borrowing
Once your USBA Group Whole Life policy has built sufficient cash value, you can request a loan against it. Although borrowing from your USBA Group Whole Life policy can be beneficial, it is important to thoughtfully consider the following. Here are the key details to keep in mind:
- Interest Rate: Any loan taken against your policy accrues interest.
- Repayment Flexibility: You can make payments at any time, in any amount, until the principal is fully repaid.
- Capitalized Interest: If you do not pay the interest on your loan, it will be added to your principal balance each year.
- Impact on Death Benefit: If you pass away before repaying the loan, the remaining balance, including interest, will be deducted from your death benefit. Your beneficiaries will receive the reduced amount.
- Policy Termination Risk: If the outstanding loan balance (including interest) ever exceeds the policy’s total cash value, the insurance coverage will be terminated.
Benefits of Taking a Loan Against Your Policy
A loan against your whole life insurance policy can offer several advantages:
- No Credit Check Required: Unlike a traditional loan, borrowing against your policy does not require a credit check or approval from a financial institution.
- No Fixed Repayment Schedule: You decide when and how much to pay back, making it a flexible borrowing option.
- Potential Tax Advantages: Life insurance loans are generally not considered taxable income, making them a tax-efficient way to access funds.
Other Ways to Use the Cash Value of Your Policy
If your policy has built up cash value, you have additional options beyond borrowing:
- Surrender for Cash Value: You can choose to surrender your policy and receive its cash value. However, this will terminate your coverage.
- Convert to Paid-Up Insurance: You can convert your cash value into a smaller, fully paid-up life insurance policy, eliminating the need for future premium payments.
How Much Coverage is Available?
USBA Group Whole Life coverage is available in amounts ranging from $5,000 to $750,000, in $1,000 increments. The overall maximum coverage for each Member/Associate Member is $650,000 under all USBA-sponsored Group Life Insurance policies, with the option for those ages 71 and below, if approved, to add up to an additional $100,000 of Group Whole Life, for a maximum of $750,000.
How to Request a Loan on Your USBA Group Whole Life Policy
To borrow against your policy’s cash value, follow these steps:
- Check Your Policy’s Cash Value: Review your Certificate of Insurance or contact USBA to determine your available cash value.
- Submit a Loan Request: Contact USBA to initiate a policy loan request. Current interest rates will apply.
Final Thoughts
Borrowing against the cash value of your USBA Group Whole Life Insurance policy can provide financial flexibility when needed. However, it is crucial to understand the loan terms, repayment conditions, and the impact on your policy’s benefits. If you are considering taking a loan, reviewing your policy and consulting with a USBA representative can help you make the best decision for your financial situation.
For complete details, refer to your Certificate of Insurance, contact our Member Services Team at 877-297-9235, or email us for assistance.
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