Can you take money out of the cash value of a whole life insurance?
Sunday, November 6th, 2011 at
7:21 pm
I was wondering and is something I want to do if is possible, can you take money out of the cash value of a whole life insurance policy and put it in a instant annuity. And then also pay the interest from the loan you took from the whole life insurance policy with interest from the annuity.
Filed under: Life Insurance Quotes
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Theoretically you could, but whether it made any sense is a different story. If you don’t need the insurance anymore then you could just convert the whole policy into an annuity and have no loan. Consult your financial advisor.
You can borrow money from the cash value. You will be charged about 8% interest on the loan. If someday you die, the loan balance plus the interest will be deducted from the face amount. The remaining balance of the cash value is kept by the insurance company upon your death.
If someday you want to cancel the policy, you should pay off the loan first before doing so. If you don’t, you will owe income taxes on the loan balance.
By the way, annuities won’t pay much interest. They have high management fees, which reduces the rate of return on your investment.
You can but you will always loose money because no one pays you what they charge you and even though you are "borrowing" your money you pay interest to the issuer
You can take a loan against the value of your policy. You are unlikely to find a fixed investment that would cover your loan costs. Call your insurance company for details.
You can’t "take it out" but you can borrow against that cash value, and then you have to pay interest to the insurance company on the "loan" of your own.
I think you haven’t done the math on this.
Unless you invest a very large, six figure sum of money in the annuity, you have to wait YEARS before you can get any kind of payout. And if you HAVE that much money, to buy an annuity with a lump sum, why in the world are you buying LIFE insurance?
The interest rate on the cash value loan, is going to be two to three times the interest you’d earn on the annuity.
Both those products, whole life and annuities, are very, very heavy on the fees cost. You’re going to be paying a large amount in commissions, for both of those.
I don’t understand why, if you can afford the whole life insurance, you would NEED to borrow cash value (which reduces death benefit) at an interest rate, to buy the annuity. If the goal here is INVESTING, you’ve picked just about the most expensive way to do it – the most dollars out of your pocket, for the smallest return.