Can You Borrow Against Liberty National Life Insurance?
Yes, you can typically borrow against the cash value of a Liberty National life insurance policy, provided it is a permanent type such as whole life or universal life. The loan is secured by the policy's cash value, incurs interest, and reduces the death benefit until repaid.
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How Policy Type Determines Borrowing Ability
Only permanent policies accumulate cash value; term policies do not. If you own a Liberty National whole life or universal life plan, the insurer will allow a policy loan up to a certain percentage of the available cash value, often 90%.
Loan Limits and Interest
The maximum loan amount is calculated as a percentage of the cash surrender value, minus any outstanding loans. Interest rates are set by Liberty National and may be fixed or variable, typically ranging from 5% to 8% APR. Unpaid interest compounds and further reduces the death benefit.
Impact on Coverage and Taxation
Borrowing does not trigger a taxable event as long as the policy remains in force, but if the loan balance exceeds the cash value, the policy could lapse, creating a taxable distribution. Additionally, the death benefit paid to beneficiaries will be reduced by the outstanding loan amount.
Steps to Obtain a Policy Loan
- Contact your Liberty National agent or customer service.
- Request a loan application and provide the desired amount.
- Review the loan terms, interest rate, and repayment schedule.
- Sign the agreement; funds are usually disbursed within a few business days.
Key Considerations Before Borrowing
Weigh the immediate cash need against long‑term effects on your policy's growth and death benefit. If you can repay the loan promptly, the impact is minimal; prolonged balances may erode the policy's value.