Yes, you can generally borrow money from your MetLife life insurance policy, provided it is a type of policy that accumulates cash value, such as a whole life or universal life policy. This feature allows policyholders to access a portion of their policy's accumulated value.
Understanding Life Insurance Policy Loans
A life insurance policy loan is essentially an advance from your policy's cash value, not a traditional loan from a bank. You are borrowing against your own money, with the policy serving as collateral. This means you aren't subject to credit checks for approval, and the repayment terms can be more flexible than with conventional loans.
Eligibility and Conditions for a Policy Loan
To be eligible for a loan from your MetLife life insurance policy, specific conditions must be met:
- Policy Issuance: Loans are allowed at any time after the policy has been issued.
- Available Loan Value: There must be sufficient cash value or "loan value" accumulated within the policy or any attached riders. The amount you can borrow is typically a percentage of your policy's cash surrender value.
Impact of Taking a Loan from Your Policy
While borrowing from your life insurance can be a convenient way to access funds, it's crucial to understand the implications:
| Aspect | Without Policy Loan | With Policy Loan |
|---|---|---|
| Cash Surrender Value | Remains fully available for withdrawals or surrender | Decreases by the outstanding loan amount |
| Death Benefit | Full face amount of the policy | Reduced by the outstanding loan balance plus interest |
| Interest | Not applicable | Accrues on the unpaid loan balance |
- Decreased Cash Surrender Value: The amount of the loan reduces your policy's available cash surrender value. If you surrender the policy while a loan is outstanding, the loan balance will be deducted from the payout.
- Reduced Death Benefit: If the loan is not repaid, the outstanding loan balance, plus any accrued interest, will be deducted from the death benefit paid to your beneficiaries upon your passing.
- Accrued Interest: Policy loans accrue interest. While you are not required to make fixed monthly payments, the interest will continue to accumulate, increasing your outstanding balance. If the accumulated loan balance (principal + interest) ever exceeds the policy's cash value, the policy could lapse, potentially leading to adverse tax consequences on the unpaid loan amount.
Key Considerations Before Borrowing
Before taking a loan from your MetLife life insurance policy, consider these practical insights:
- Repayment Flexibility: Unlike traditional loans, there isn't a strict repayment schedule. You can repay the loan at your own pace, or not at all, but the interest will continue to accrue.
- Tax Implications: Generally, a loan from your life insurance policy is not considered taxable income, as it's an advance against your own money. However, if the policy lapses due to an unpaid loan, the amount of the loan that exceeds the premiums paid could become taxable.
- Policy Performance: If your policy earns interest or dividends, the portion of the cash value used for the loan may no longer earn the same rate, potentially impacting your policy's long-term growth.
How to Request a Policy Loan
To initiate a policy loan, you would typically follow these general steps:
- Contact MetLife: Reach out to MetLife's customer service or your financial advisor to confirm your policy's eligibility and current loan value.
- Review Policy Terms: Understand the specific terms, interest rates, and any fees associated with policy loans for your particular contract.
- Submit Request: Complete the necessary forms provided by MetLife for a policy loan request.
