Generally, insurers will allow policyholders to borrow against permanent or whole life insurance policies

Can You Borrow Against Burial Insurance Policies?

Burial insurance is a type of whole life insurance that provides people the opportunity to pay towards it to unlock its benefits. Some may wonder, however, if it’s impossible to borrow against the policy in order to receive funds to pay for immediate expenses. In understanding this, it’s important to know if this is possible and if so, how to unlock this option and how this affects the policy.

Is it Possible to Borrow Against Burial Insurance Policies?

Generally, insurers will allow policyholders to borrow against permanent or whole life insurance policies. Considering burial insurance is a type of whole life insurance, policyholders should be able to borrow against it. If an amount is borrowed, it’s most commonly in the form of a loan that accumulates interest and involves the insurance policy being collateral.

How Is This Possible?

Burial insurance, like other whole life insurance policies, will typically gain in value within a few years of the purchase. This is possible because the insurer will invest the money the policyholder pays (through premiums), which (hopefully) will involve gains that will boost the face value of the policy and create a “cash value” that can act like a savings account. In addition, there’s generally no credit check or approval process — considering the person would be basically borrowing from themselves.

How Does This Affect The Death Benefit and Policy?

Various factors and circumstances could affect a death benefit and policy if a person borrows against it. Considering the amount borrowed is technically considered a loan that gains interest that needs to be paid, the amount borrowed can affect how much needs paid.  

In addition, the length of time it takes to pay back can affect the total amount that needs to be paid because it will gain interest. There’s generally not a timeframe required to pay it back but if not paid, the amount could go against and decrease the amount of the death benefit or force the insurer to cancel the policy altogether. This can depend on the face and cash value of the remaining amount of the policy at the time of death or while living.  

In other words, if the insurer determines that the amount owed is more than the amount eligible to receive they can cancel the policy.

Key Takeaways

Burial insurance is a type of whole life insurance, which most commonly has the option to borrow against it. 

  • When doing so, you should know that the amount borrowed is considered a loan that will gain interest — and the loan will need to be repaid. 
  • Not doing so in a timely manner (or at all) could force the insurer to cancel the policy or take the amount owed out of the death benefit at the time of the policyholder’s death.
  • If you think you may need to borrow money at some point, consider this when determining how much life insurance to buy.  

If you need help deciding whether burial insurance is right for you, please call Senior Life Services at 800-548-3249.