Dear Insurance Adviser,
I borrowed on my whole life policy and never repaid the loan or the interest. The value has become half of the face amount because of accumulating interest. The question is: Can I repay the amount I borrowed and not the interest? Will this stop any interest from accruing in the future?
— Dee

Dear Dee,
Life insurance loans work like any other loans. You can’t just pay the borrowed amount back and waive any interest. If you pay back only what you borrowed, the unpaid interest will continue to accumulate more interest.

This might be a good time to evaluate your policy. Do you still need life insurance? If not, you can surrender your policy, which will terminate your loan. If there’s any cash surrender value remaining in excess of your policy loan plus interest, you will be refunded that amount.

If you do still need life insurance, re-evaluate how much you need. A good life insurance agent or financial planner can help you with that.

If you can qualify for a new policy, you may want to consider inexpensive term life insurance. There is no cash value, but the premiums are a fraction of the cost of whole life insurance. Needless to say, if you decide to apply for a new life insurance policy, keep your existing one until your new policy has been approved.

If you are declined for a new policy, your only option may be to continue your current whole life policy and make loan payments as you can. Otherwise, with the cash value pulled out of the policy and the loan amount increasing regularly due to the interest, you’re essentially left with expensive decreasing term life insurance with increasing annual premium payments.

Best wishes!

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