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Policy loans: Why pay interest on your own money?

Time: 2017-01-06         Source: Insurance niche         Author: Insurance niche

Many people know something about insurance before they know that many policies and insurance policiesloanThe function can revitalize the insurance policy and quickly realise the benefits. However, the policy loan is borrowed from your own money. Why should interest be paid?
Here is a description of the problem from two perspectives.
One: At the time of premium collection, the insurance company assumes that the assets generated by the total net cash inflow from the policy will be used for investment and generate interest. The insurance company expects these interest incomes and discounts (reduces) the premiums in advance. If the policy owner extracts their proportional share from the assets (through the policy loan), and the insurer does not charge interest on the loan, the insurance company's assumptions about the future earnings of these assets cannot be realized. If the insurance company does not charge interest on the loan, it should not convert the premium for future total investment income. The end result of this will be a much higher premium, and of course, the policy owner does not have to pay interest.
  Second: The policy loan is essentially a kind of borrowing act that the insured uses the cash value of the policy as a mortgage to lend to its insurance company.Many people misrepresent this right as "the cash value of borrowing a policy". This wording is misleading and wrong. The policy owners cannot borrow their cash value, and some have the right to guarantee the loan value of the loan from the insurance company. Just like we have a house, we can live. When we urgently use cash, we can use the house as collateral to get a loan from the bank. At this time, we also need to pay interest, and it does not affect our right to live in the house. Similarly, the term of the policy loan loan will not affect the policyholder's benefit of the policy, such as protection, dividends and so on. In the event of an insured event during the loan period, claims can still be filed. Actual claims insurance benefits = contracted insurance benefits - policy loans - loan interest.
Therefore, the policy loan does not actually use its own money. What are the benefits of that policy loan?
1) The urgent need for capital turnover, the use of policy loans, to avoid the loss caused by the surrender, does not affect the policy due rights.
2) The procedure is simple and does not require a credit review of the borrower, nor does it require the use of a loan.
3) Borrowing interest is calculated according to "days". After the loan expires, it can be renewed. You can only repay the interest, do not pay back the principal, and reduce the repayment pressure.
4) Loan rates are fast and interest rates are low.
At present, the policies that can be loaned on the market generally cover 70%-95% of the cash value of the policy. Now that people have become more aware of insurance and more and more families have purchased insurance, insurance has become an important part of family assets. Correctly recognizing the characteristics of these assets will enable us to use more fully and rationally our own accumulated assets. wealth.

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