mbrcatz
 |
The beneficiary can't pull it out. Only the owner can. And, it's either for cancelling the policy, or as a loan. If it's a loan, they pay interest on it to the insurance company, and if the insured dies with the loan unpaid, the interest and loan are subtracted from the payout. |
james m
 |
If you are the beneficiary, you can't get access to the cash or loan value, or have any other control of the policy, unless you are also the owner of the policy. If you are not the owner, you have no control over the policy at all.
Note:
ONLY Whole Life, Universal Life, or Limited Payment Life, and their variable counter parts, accumulate cash or loan value.
Although most term policies do not accumulate cash value, some do, but it's minimal. Some term policies will begin to build cash value after a few years, then later on the cash value will begin to decrease. This is to keep the premiums from increasing too fast for older people.
The owner of the policy can also be the beneficiary.
Examples:
A parent owns a life policy on a child, and is the beneficiary.
An adult child is the owner and beneficiary of a policy on a parent.
A grandparent buys a policy on a grandchild, and makes a parent the owner and beneficiary.
A husband is the owner and beneficiary of a policy on the wife.
A wife is the owner and beneficiary of a policy on the husband.
An employer is the owner and beneficiary of a policy on a "key employee."
Partners in a business partnership can own policies on each other, and be the beneficiaries on the policies. This is the way to fund a "Buy-Sell" agreement.
A church member buys a policy, keeps the premiums paid, and makes the corporate church the owner and irrevocable beneficiary. The church has access to the cash, and will receive the benefits at the death of the insured. The insured gets an income tax deduction for the premiums paid each year.
If you are the owner, you can borrow against the cash or loan value, or simply cash the policy in for the total cash value.
If you cash the policy in, that cancels the insurance policy. If a loan is taken against the cash or loan value, it will accumulate interest, just like a loan at a bank.
If there is an outstanding loan at the time of death of the insured, the loan and accumulated interest, if any, will be deducted from the death proceeds.
Rather than taking a loan against the value of a life
insurance policy, the owner of the policy can also use the cash accumulation as collateral for a loan at a bank, assuming the credit is worthy of a bank loan. |
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