Loan or take cash out

General
1

Hello I’ve had a Variable Universal Life policy with Lincoln since 2019. Before that, I had a policy with Mass Mutual.

I have enough cash accumulated to pay for the new car I’d like to buy. I can surrender (take it out) or borrow it. My head thinks that the loan is a better option because I’d be paying it back to the policy. I spoke with an insurance agent friend to see of this makes sense, but he came up with more questions than answers and didn’t truly give me a yes/no answer.

Does it make sense, is it wise, should I, use this money for the car purchase? The policy is for a large amount, so if my kids or wife get $45k or 50k less when that time comes, I’m not worried about it. I will call Lincoln to ask, but I’m not sure if they’ll give me a clear answer.

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Keeping the policy would be best so just borrowing against it would be the option I’d go so you still have coverage for your family.

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Same here. It would allow you to still have coverage and use the extra money for stuff you need (like a car)

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4

Even if that interest rate is a high 6%?

Let’s say that i take the cash in a surrender. The death benefit will decrease by that amount. Fine. Is that the only effect of my action? Or will I affect riders, or other things?

Why is it such a cryptic industry, with everything written so that the agents understand it and not the consumer??

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5

Surrendering your policy means you’re giving it up, so your family won’t be covered if you pass away. You might also face a surrender charge for giving it up.

The interest rate is something you’ll need to decide if it’s worth it, but the money you get is tax-free.

You can also call your agent to explain the details of your policy. In my opinion, it’s best to keep the policy. You can either pay it back or let it be deducted from the death benefit.

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6

Thank you for letting me know. I was told I can take the money out without surrendering or losing the entire policy. The impact is that my death benefit would decrease by that amount, and there are some fees involved, but the policy would still stay active.

I’ll call to confirm.

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7

What is the interest rate and crediting rate on borrowed funds? The difference between them is your actual interest cost.

When you repay the loan, there are no fees those dollars just move back into your investment accounts from the fixed account. But if you surrender the funds, you’ll pay upfront charges when you add money back.

Ask your agent to show a few scenarios, and then decide what works best for you long-term:
A. Withdraw funds and keep paying premiums.
B. Take a loan, never repay, and keep paying premiums.
C. Take a loan, stop paying premiums, and repay the loan instead, then go back to premiums.
D. Take a loan, keep paying premiums, and repay the loan monthly.

Even if you’re not worried about a reduced death benefit, consider how these options will affect the cash value of your policy in your retirement.

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