Reader’s Question:

I have heard of Indiana life insurance companies that offers self-banking investment vehicle or non-direct recognition life insurance. What could be the advantages if I take such a policy? I want to make sure I am protected.

Roxanne

Indianapolis IN

A life insurance is a key tool to protect your family should you die, as your policy could alleviate financial expenses for burial, replace your monthly income, pay for your mortgage and loans and even allow them to borrow cash if your policy states so. If you have heard of non-direct life insurance and you are interested about its policy, you must know that this is a type of whole life insurance policy where your dividends don’t lessen even if you take loan from it. Be aware though, that those dividends could be lower, higher or nonexistent from one year to the next. More so, this could mean that your cash value could be easily taken away faster as the loans you got could directly reflect on said cash value. If you want to get a loan using your whole life policy, always make sure that you only get such loans from non-direct recognition life insurance companies. Not being able to do so could result in being penalized by your insurance carrier for taking loans that are against the cash value of your policy.

In getting loans from non-direct life Indiana insurance companies, present and future compounded cash value usually is not affected by the loan. Even your death benefit and growth in future death benefit remains unaffected as well. Both assume the loan is paid back at some point. Rates are usually extremely low because your own cash is your collateral.  Your loan can be paid off anytime by simply using the cash value of your policy which in affect can convert the money taken as a withdrawal. The loan may have a cost but it usually is offset as your cash value increases. If the loan is not paid before death of an insured, it will be paid off by your death benefit and your loved ones will still be spared from carrying your financial debts.

Getting loan policy with non-direct recognition life insurance companies seems to have its own advantages but surely you must really understand the ins and outs of this policy to effectively use this insurance as your financial vehicle. Set the policy right to maximize the advantages it offers.