Can you borrow money from group life insurance?

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Asked May 23, 2011

1 Answer


The simple answer to this question is: probably not. Group life insurance, like term life, may not have a cash value, and that is the portion of the policy that you are able to borrow against. Read through your policy carefully, and it will state how cash value is determined, or if it is available at all.

The best advice given to owners of group life insurance is to convert the policy over to a permanent life insurance policy, also known as a whole life policy. This type of policy includes a cash value that increases over time as your premiums are paid. When a financial crisis pops up, you can then borrow against the accrued cash value of your life insurance policy without any collateral or credit check. You are limited to the amount of money accrued in the cash value, but you are essentially borrowing money from yourself, and there are no interest charges on the loan. If the loan is not paid back into the account, however, it will reduce the amount of payout available if something should happen and a life insurance claim has to be filed.

Group life insurance is generally more affordable than individual whole life policies. It does not include cash payouts, and most group life policies will not allow you to participate in how the premiums are invested, or allow you to borrow against the payout amount. Group life insurance is a great way to get an insurance policy established, but it is in the best interests of the policyholder to convert to a permanent life insurance policy to increase the usefulness and value of the policy for uses beyond a final death payout.

Answered May 23, 2011 by Anonymous

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