Whole Life Insurance Loan Program

Receive up to 95% of your whole life policy’s cash surrender value

- Should I Cancel My Whole Life Insurance Policy? -

You bought a whole life insurance policy ages ago, thinking you were investing in your future and the future of your loved ones. But after years of paying pricey premiums, the expense of that policy is wearing you down. You can’t help but wonder, should you cancel your whole life insurance policy and move on? 

Canceling your insurance does eliminate your premium payments, but there are negative consequences, too. You’ll no longer have a death benefit and the cash payout on cancellation is probably far less than what you’ve invested in the policy to date. Despite those negatives, deactivating your coverage may feel like your only option. 

Fortunately, canceling your life insurance isn’t the only option. Cancelation is one of several strategies available, and it’s usually the least beneficial of the bunch. Read on for a closer look at how whole life insurance policies work as well as four ways to get cash from your whole life insurance — including at least one you’ve probably never heard of.

Whole Life Insurance Overview

Whole life insurance provides two main benefits to you as the policyholder. One, you are covered by a tax-free death benefit that your designated beneficiary will receive when you die. And two, the policy has a savings component called cash value that can provide liquidity later in life. 

Your insurance premiums pay for the cost of your insurance, plus an extra amount to fund your cash account. Your cash earns interest and may pay dividends. You can normally access your cash value balance and your dividends while you are living. Most policies allow you to borrow against the cash value or withdraw it directly. As well, you may have some other options for using your dividends. For example, you might be able to apply dividends to your premiums or use the dividends to increase your death benefit.


  • Big payoff. A whole life insurance policy can provide a big payoff once you reach “paid-up” status. When your policy is paid-up, it means you “own” your death benefit with no further obligation to pay additional premiums. As long as you don’t withdraw or borrow cash, your policy will pay your full benefit to your beneficiary when you die.  


  • High premiums. Whole life premiums are expensive. The premiums can cost up to 15 times more than premiums on a term life policy with the same death benefit. Term life insurance has no cash value, only a death benefit that covers you for a limited time.   
  • Inflexible. If you miss a single payment before your policy is paid-up, you risk a policy lapse and loss of coverage. 
  • Commitment. A whole life policy is a long-term commitment. Depending on the structure of your contract, it can take decades to fully fund your policy.
  • Risk. Your financial situation and needs can change over time, making the insurance either unaffordable or unnecessary. If you surrender the policy, you may lose much of your cash value to surrender fees and/or taxes. 

Best Options to Get Cash From a Whole Life Insurance Policy

Surrendering your insurance is one way to eliminate your premiums or deal with a policy you no longer need. But it’s not the only way or even the best way. Here are four options for liquidating your whole life insurance.

1. Borrow against your whole life insurance policy with our Whole Life Insurance Loan Program

You can use your whole life policy as collateral for a loan through our whole life insurance loan program. You'd get a one-time, tax-free cash distribution and our loan program will pay the insurance premiums going forward. You don't have to repay the loan unless you want to. Best of all, your beneficiary would still receive a portion of your death benefit when you pass.

2. Sell your policy with a whole life settlement

You can also sell whole life insurance to an investor in a life settlement. The life settlement transfers the entire policy -- death benefit, cash value, and premiums -- to someone else. You receive a single cash payment in return, a portion of which may be taxable. You will no longer be covered by the death benefit or have access to the policy's cash value.

3. Borrow against your whole life policy with the insurance company

You can borrow against your whole life policy's cash value through your insurance company. The loan will make it harder for you to pay up your policy for two reasons. One, you have to pay back the funds you borrowed. And two, the insurer will charge a higher interest rate on the loan than what the policy earns in its cash account. As a result, you may have to increase your premiums to avoid a policy lapse. If you can't pay more and the policy does lapse, the IRS may recast your loan as a taxable distribution.

4. Cancel or surrender your whole life insurance policy

Canceling or surrendering your whole life insurance is the strategy that benefits you the least. A cancellation gets rid of your premiums, but it also ends your coverage. Your beneficiaries will not receive a death benefit when you pass. You will also lose much of your investment in the policy to fees and taxes.

Our Whole Life Insurance Loan Program

Our whole life insurance loan program meets the needs of policyowners who want to reduce their expenses and raise cash, without losing their death benefit. Here are three key benefits of our whole life insurance loan program.

  • No more premium payments. Once the loan closes, you are no longer responsible for policy premiums. The loan program pays those premiums on your behalf. 
  • Cash on hand. At closing, you receive a “loan for life” cash payment. The payment amount is based on your policy details, but it’s normally 90% to 95% of the policy’s cash surrender value. You have no obligation to make principal or interest payments, but you can if you want to. Interest can be accrued throughout the life of the loan. 
  • Death benefit stays in force. If you sell or surrender your life insurance, you lose the death benefit entirely. A loan through our program keeps your death benefit active and available to your chosen beneficiary. When you pass, the death benefit repays your loan and the remainder is paid out, tax-free, to your loved ones. The loan guarantees a fixed minimum death benefit payout, regardless of how long the loan is outstanding.

How Much Can I Get From This Loan?

As noted, your cash proceeds can be 90% to 95% of your policy’s cash surrender value. Here are three case studies to demonstrate how the policy value affects your loan proceeds, and how the loan affects your death benefit.

Case study 1: No change to policy

  • Current policy death benefit: $250,000
  • Current cash value of policy: $82,000
  • Loan amount: Our program would normally fund a loan of $82,000 against this policy. The policyholder would receive the funds in one to two weeks.  
  • Death benefit: The death benefit available to beneficiaries depends on how long the loan is outstanding. If the insured dies shortly after the loan funds, the designated beneficiaries would receive $168,000. 

Case study 2: Conversion to smaller, paid-up policy 

  • Current policy death benefit: $334,000
  • Current cash value of policy: $110,000
  • Loan amount: Our program would normally fund a loan of $110,000 against this policy. The policyholder would receive the funds in one to two weeks.  
  • Death benefit: If the policy is later converted to a smaller, paid-up policy with a death benefit of $240,000 and the cash value grows to $125,000, the death benefit available to the beneficiaries would be $115,000.

Case study 3: Policy surrender 

  • Current policy death benefit: $500,000
  • Current cash value of policy: $165,000
  • Death benefit: If the policyholder surrenders this coverage without taking out a loan, the designated beneficiaries would receive no death benefit.

Am I Eligible for the Loan?

Most whole life policyholders are eligible for a loan through our program. Our program accepts single and joint life policies as loan collateral. Unlike a life settlement, your age, health, and life expectancy do not affect your eligibility or your potential cash proceeds.

How Long Does the Whole Process Take?

After Harbor Life Brokerage receives the in-force illustration from your insurer, you should have your cash in as quickly as two weeks.

What Is the Process to Apply for the Loan?

The loan application process is straightforward. There are four steps: 

  1. Apply. You submit your request for the loan. 
  2. Evaluate. Harbor Life Brokerage will ask your insurer for an in-force illustration. An in-force illustration is a forecast of how your cash value balance will perform going forward. Harbor Life uses this information to determine the loan amount available to you through our program. You do not need to submit to a medical exam or a health questionnaire. 
  3. Contract. Once your loan amount is finalized, Harbor Life Brokerage prepares the paperwork to finalize your loan.
  4. Payment. You will receive your loan proceeds in cash after the documents are signed. As soon as we receive the in-force illustration from your insurer, we can get cash in your hands as fast as 2 weeks.

Will I Have to Pay Any Interest on the Loan?

Yes and no. Interest is applied to your outstanding loan balance, but those charges don’t come out of your pocket. They are added to your loan balance, which is later repaid by your death benefit. You could let the interest charges accrue for the rest of your life, without making a single payment on your loan. 

If your financial situation changes and you want to repay the loan or make interest payments, you can do so. Any repayments would increase the amount of your death benefit that will be available to your beneficiaries later. Again, this is optional. You are under no obligation to repay the principal or make any interest payments at all. In legal terms, the loan has recourse only against the policy, not against the borrower. This means we cannot legally ask you personally for payments on the obligation. 

Some traditional banks will lend money using a whole life insurance policy as collateral. It’s important to note that these bank loans function differently than a loan through our program. The traditional bank loan uses only the policy’s cash value as collateral, while loans through our program consider the cash value and the death benefit. No matter how long the loan is outstanding or how much interest accrues, you can never owe more than the cash value and death benefit on the policy. 

A loan through our program also guarantees a fixed minimum death benefit for your beneficiary. Your beneficiary can receive more than the minimum, but not less.

Will I Have to Pay Taxes on the Loan?

Life insurance loans from our program are not taxable, ever. We refinance the policy in full which does not affect your taxable income. Since we keep the policy active, there’s no danger of the policy lapsing later. 

In contrast, life insurance loans from the insurer can be taxable in two situations: 

  • If the loan amount is more than what you’ve paid cumulatively in premiums. 
  • If you have an outstanding loan balance when you surrender the policy, the loan may be treated as taxable income by the IRS.

Get Cash From Your Whole Life Insurance Policy, Worry-free

You have a lot of value tied up in your whole life insurance policy. While there are different ways for you to access that value, most of them require you to give up your insurance or to put the health of your policy at risk. There is just one option for liquidating whole life insurance that keeps your death benefit intact and ensures your policy remains active — a loan through our whole life insurance loan program. The loan pays your future premiums, too. 

Ready to receive up to 95% of your whole life policy’s cash surrender value, without any tax consequences? Contact Harbor Life and apply for our whole life insurance program today.

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