Borrowing From Your Unum Life Insurance: Is It Possible?

Unum offers a range of life insurance policies, including term life insurance and whole life insurance. Term life insurance is a cheaper option that provides coverage for a specific period, while whole life insurance offers longer-term coverage with the ability to build cash value. This cash value can be borrowed against, but it is important to consider the risks involved, such as reduced death benefits and potential tax implications if the loan is not repaid. Borrowing against a life insurance policy can provide quick access to cash without the need for credit checks or qualifications, but it is important to understand the potential impact on the policy's value and benefits.

Whole Life Insurance

One of the key features of whole life insurance is its ability to build cash value over time. This cash value grows at a guaranteed rate and is tax-deferred, providing financial benefits to the policyholder during their lifetime. The cash value can be accessed by the policyholder for various purposes, such as borrowing or using it towards a paid-up policy. However, it's important to note that borrowing against the cash value of a whole life insurance policy can reduce the death benefit if not repaid.

When considering whole life insurance, it's important to weigh the benefits against the costs. Whole life insurance tends to be more expensive than term life insurance due to its longer-term coverage and cash value component. However, the premiums remain consistent throughout the life of the policy, providing a fixed expense. It's also important to note that the cash value growth may not always increase the death benefit, depending on the specific policy.

Universal Life Insurance

The cash value of a universal life insurance policy earns interest based on market trends or a minimum interest rate. It usually takes a few years for the cash value to build up to sufficient levels to take out a loan. Once the cash value reaches a certain threshold, the policyholder can borrow from that account. The money in the cash value grows at a rate that depends on the type of policy.

Borrowing from a universal life insurance policy can be a quick and easy way to get cash. There is no approval process or credit check, and the money can be used for anything. The loan is also not recognised by the IRS as income and remains tax-free as long as the policy stays active. However, it is important to pay the loan back in a timely manner, as interest is added to the balance and can cause the policy to lapse if left unpaid. If the loan is not paid back before the insured person's death, the loan amount and interest owed are subtracted from the death benefit, reducing the amount received by the beneficiaries.

Permanent Life Insurance

There are a few different types of permanent life insurance policies. These include:

• Whole life insurance: This is the most common type of permanent life insurance. It has fixed premiums and accumulates cash value over time.
• Universal life insurance: This type of policy allows the policyholder to adjust their premiums and death benefit. It may negatively impact the cash value of the plan and premiums may increase over time.
• Variable universal life insurance: This type of policy has flexible premiums and a savings component. The savings portion, or cash value, grows based on the investment methods chosen by the policyholder.
• Indexed universal life insurance: This type of policy has the same basic structure as permanent life insurance but the cash value grows based on a chosen stock market index.

The main benefit of permanent life insurance is that it lasts for the entirety of the policyholder's life. It also has a cash value component and offers a few retirement planning benefits. However, it is more expensive than term life insurance.

Term Life Insurance

Unum, a leading insurance provider, offers Term Life Insurance as part of its employee benefits package. This type of insurance is ideal for employees who want to ensure their loved ones are taken care of during their working years. In the unfortunate event of the policyholder's death, Unum's Term Life Insurance can assist families in covering funeral costs, daily expenses, bills, and other financial obligations.

One of the key advantages of Term Life Insurance is its flexibility. It can be tailored to meet the evolving needs of employees and their families. Unum allows employees to increase their coverage during enrollment events, ensuring that their protection keeps pace with their life changes. Additionally, Term Life Insurance plans from Unum can be extended beyond the original term period, providing continued protection even after the specified timeframe.

When considering Term Life Insurance, it's important to evaluate factors such as annual income, existing debt, and future financial goals. Unum's Term Life Insurance plans can be customized to suit the unique circumstances of each employee, ensuring they have the necessary protection during their working years.

Variable Universal Life Insurance

Variable Universal Life (VUL) Insurance is a type of permanent life insurance policy that combines lifelong insurance protection with flexible premiums and a cash value that can be accessed while the policyholder is alive. VUL policies are built like traditional universal life insurance policies but allow the policyholder to invest the cash value in the market via subaccounts. These subaccounts are structured like mutual funds, with each offering an array of stock and bond accounts, along with a money market option.

VUL policies give the policyholder control over how to invest their cash value. They can pick the subaccounts that best fit their risk tolerance and investment objectives. If the investments perform well, the cash value will grow more quickly. However, if the investments perform poorly, the cash value will not grow as quickly, and the policyholder may even lose money.

VUL policies are designed for people who want a permanent life insurance policy that has the potential to accumulate cash value and offers a variety of investment options. These policies can be customised with a range of optional features, such as the Long-term Care Rider, for an additional charge.

While VUL insurance offers increased flexibility and growth potential over other life insurance options, it also carries more risk. The cash value return is not guaranteed, and if the cash value balance is too low, the policyholder may need to pay higher premiums to keep their VUL policy active. VUL policies can also charge high fees because the policyholder is paying for both life insurance and investments.

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