Borrowing Against Life Insurance: What Knights of Columbus Policyholders Need to Know

Can You Borrow Against Your Knights of Columbus Life Insurance?

Yes – Knights of Columbus policyholders can access a cash value loan against their whole life insurance policy. The loan is taken from the policy's accumulated cash value, not from the premium payments or death benefit.

How the Loan Process Works

Eligibility

To qualify for a loan, you must have a living policy with a substantial cash value. Policies in the first few years often have minimal cash value, so loans are typically only available after the policy has been active for several years.

Loan Amount and Interest

The loan amount is limited to a percentage of the cash value, usually 80‑90%. Interest rates are fixed and set by the insurer, commonly ranging from 5% to 8% per year.

Repayment Terms

Loans are interest‑only or can be paid in full with principal and interest. If unpaid, the outstanding balance, plus accrued interest, is deducted from the death benefit or the cash value if the policy is surrendered.

Tax Implications

Loans are generally not taxable as long as the policy remains in force. However, if the policy lapses or is surrendered with an outstanding loan, the loan balance may become taxable income.

Pros and Cons of Borrowing Against Your Policy

• Pros: Immediate access to funds, no credit check, interest may be lower than unsecured loans.
• Cons: Reduces death benefit, potential tax consequences, and repayment pressure.

Alternatives to Policy Loans

Other Loan Options

Home equity loans, personal lines of credit, or a refinance may offer lower interest rates and preserve the death benefit.

Policy Surrender or Lapse

Surrendering the policy returns the cash value minus fees, but you lose the death benefit and any tax advantages.

Key Considerations Before Taking a Loan

• Assess the impact on your death benefit and beneficiaries.
• Confirm the loan interest rate and repayment schedule.
• Check for any loan fees or penalties.
• Consult a financial advisor or tax professional.

Example of a Loan Statement