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Jun 9, 2020 by |

San Francisco and California Life Insurance and Financial Elder Abuse Attorney: Whole Life Insurance Policy Loans

ATTORNEY NEWSLETTER

Dangers of Premium Payment Loans

Tax Consequences

Borrowing against a whole life insurance policy can have serious economic and tax consequences down the road if policyholders are not careful. Insurance agents use the fact that policyholders can borrow against the cash value of whole life policies as part of their sales pitch. The selling point encourages the client to view a whole life policy as a private bank where the policyholder can borrow money from time to time. Our litigators urge caution when borrowing against any whole life policy as there may be economic consequences, like big tax bills, down the road whenever you borrow. If you’re over 60 and live in California and have suffered a loss on a whole or universal life insurance policy, call the insurance and financial elder abuse attorneys at Evans Law Firm, Inc. today at 415-441-8669.

Often, policyholders borrow against the cash value in whole life policies to make their ongoing premium payments. The borrowing keeps the policy in force until the cash value is reduced to zero by the premium payments and interest incurred. In other instances, policyholders may borrow for college tuition money for their children or other expenses. Unfortunately, the loans are often forgotten until the policy coverage is lost entirely and a large taxable gain is created (by the write-off of the amount borrowed).

In short, policy loans can end up creating huge economic problems for policyholders and are not easily fixed. Agents seldom monitor policies once the policies are sold so the policyholder may be in the dark as to the ultimate consequences of policy loans. Typically, agents do not fully explain how policy loans work at the time of sale either. Before borrowing against any whole life policy, even for premium payments, consult your tax advisor.

Contact Us

If you are over 60 and surrendered a whole life or universal life insurance policy in California, contact Ingrid M. Evans and the other Evans Law Firm, Inc. insurance attorneys for a free review of your policy at (415) 441-8669, or by email at <a href=”mailto:info@evanslaw.com”>info@evanslaw.com</a>. Our attorneys have experience with complex indexed universal and whole life policies and annuity contracts and cases against large insurance companies. We can help guide your case through a jury trial or toward an equitable settlement. We handle cases involving physical and financial elder abuse, nursing home abuse, whole life insurance and universal life insurance, and indexed, variable, and fixed annuities.

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