Policy Loans

Taking a loan from your existing policies may be a good idea when you need cash urgently. This usually applies to traditional policies, also known as Whole Life policies. And the interest rate is definitely much lower compared to credit cards at 24% per annum. Normal policy loan interest rates ranges from 6% to 8%.

At the same time, you enjoy the coverage provided by your policies. However, your policy must have certain cash value before you can take out a policy loan; and subjected to the conditions set by the insurance company. Do note that when you take out a loan, your return on investment will be reduced, depending on the amount you cash out.

On the other hand, if you own a ILP (Investment-Linked Policy), you need not take out a loan. You simply cash-out the amount you need. This is one of the beauty of an ILP. An ILP is a combination of investments (Unit Trusts) and life insurance in one plan. Insurance charges are deducted from the investment component of the ILP.

You can even go for premium holidays, which means you don't have to any premiums, and yet enjoy continuous coverage.* I believe this is useful, especially when the individual is in a temporary financial difficulty and unemployment. In the case of a traditional policy, to stop paying premium may impact the return rates severely, and in worse cases, the policy may even lapse.



* terms and conditions varies with different companies. For all plans, needs and concerns must be taken care of, before determining whether the plan is suitable for the individual. Feel free to drop me an email to discuss further.