How to Borrow Against Your Unum Life Insurance Policy

Understanding Policy Loans with Unum

Unum allows policyholders to take a loan against the cash value of a permanent life insurance policy, providing a source of funds without surrendering the coverage. The loan amount is limited to a percentage of the cash value, typically up to 90%, and interest accrues until repayment. Because the loan is secured by the policy, it does not require a credit check, but unpaid balances reduce the death benefit.

Eligibility and Required Steps

To qualify, the policy must be a whole life or universal life contract that has built up cash value. The holder must submit a loan request form, provide identification, and specify the desired amount. Unum then confirms the available cash value, calculates the maximum loan, and issues the funds, usually within a few business days.

Costs and Interest Rates

Unum charges interest on policy loans, which can be fixed or variable depending on the contract terms. Rates are generally lower than credit‑card or personal loan rates but higher than the policy's credited interest. Interest compounds daily, and the loan balance is deducted from the death benefit if not repaid.

Repayment Options

Borrowers can repay the loan at any time, either in full or through partial payments. Payments can be made by check, electronic transfer, or automatic deduction from the policy's cash value. If the loan is not repaid before the insured's death, the outstanding balance plus accrued interest is subtracted from the death benefit.

Risks and Considerations

Taking a loan reduces the policy's cash value and death benefit, potentially jeopardizing long‑term financial goals. If the loan balance exceeds the cash value, the policy could lapse, causing loss of coverage and possible tax consequences. Borrowers should compare the loan's cost against alternative financing options.

When a Policy Loan Makes Sense

A policy loan is useful for emergency expenses, debt consolidation, or funding short‑term needs when other credit sources are unavailable or costly. It preserves the policy's tax‑advantaged status, unlike withdrawals that may trigger taxable events.

Key Comparison of Unum Policy Loan vs. Traditional Loans