How a MetLife Life Insurance Loan Works
MetLife allows policyholders to borrow against the cash value of permanent life insurance policies, such as whole life and universal life. The loan is secured by the policy's cash value, and MetLife generally does not require a credit check or a specific reason for the borrowing. The policyholder retains ownership, and the loan does not directly affect the death benefit unless the policy lapses or is surrendered with an outstanding balance.
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Interest is charged on the loan, and the rate depends on the policy type and the terms outlined in the contract. The loan accrues interest over time, and unpaid interest can compound. If the loan plus accrued interest exceeds the cash value when a claim is paid, the death benefit may be reduced by the outstanding amount, which is something to verify in the policy documents.
What to Check Before Taking a Loan
Before borrowing, review the policy's loan provisions and the current cash value. Check the applicable interest rate, any fees, and the rules around interest capitalization. Confirm whether the loan will affect dividends or the policy's ability to stay in force. MetLife's policy documents and annual statements provide these details, and the insurer's customer service can clarify how a specific loan would work for your policy.
Consider whether you can repay the loan without relying on the death benefit. If the loan is not repaid, the reduced death benefit may impact the financial plans of your beneficiaries. For large or long-term borrowing needs, compare the cost of a MetLife policy loan with other options, such as a personal loan or a home equity line of credit.
Risks and Considerations
The primary risk is that an unpaid loan can erode the cash value and the death benefit. If the cash value falls too low, the policy may lapse, and coverage could end. Policy loans can also have tax implications if the policy becomes a modified endowment contract or if it lapses with a gain. MetLife does not provide tax advice, so consult a tax professional for your situation.
Another consideration is that loans must typically be repaid according to the policy's terms, and failure to do so can trigger policy adjustments or termination. Borrowers should confirm the repayment process and whether MetLife allows flexible or scheduled repayments before taking the loan.
How to Apply for a Policy Loan
To request a loan, contact MetLife or log in to your policy account. You will typically need to provide the policy number and the loan amount. MetLife will confirm the available cash value and the applicable interest rate, and the loan proceeds are usually paid by check or direct deposit. The loan agreement will outline the terms, including the interest rate and repayment expectations, so read it carefully before accepting.