nordanney
2024-09-05 10:29:57
- #1
Term life insurance as loan collateral?
Hello everyone,
I have heard that term life insurance or whole life insurance policies can be accepted by banks as additional collateral if there aren’t enough other securities. Does anyone have experience with this or know to what extent such insurance policies can be used as collateral for a loan?
I am especially interested in knowing whether such insurance is sufficient to provide the bank with more security in case the income assessment or other collateral is tight. I would appreciate your experiences and tips!
Thanks in advance!
Term life insurance: has no value and only covers the event of death. In that sense, it is insurance for the family, so that the perhaps non-working partner with the three children is covered and does not have to move out of the property.
Whole life insurance: has a value in the form of the surrender value, which can serve as collateral. But please distinguish between classic whole life insurance, unit-linked whole life insurance (where the bank often applies a 40% discount on the surrender value), or pension insurance policies. There are different requirements everywhere regarding how these can be structured.
Oh, and if you have insurance, it is not positive for your income, but actually negative in reality, because money that could be available for the loan is spent on insurance. Waiving contributions might be the better alternative.
Do you have concrete figures for us?