Does Borrowing From Life Insurance Work? 
Yes . Policy loans are an ownership right . You can borrow life insurance cash values , even prior to age 59-1/2 , without a tax penalty as it is not a distribution . Loans will reduce the policys death benefit and cash value available for use . But use care here since if the policy lapses or is surrendered in full while there is an outstanding loan the amount of the outstanding loan is taxable to the extent that the policy 's gross cash value exceeds the policy-owner 's basis -LRB- sum of premiums paid -RRB- in the contract . Policies that have a cash surrender value and have been inforce for awhile have a maximum loanable value of close to the cash surrender value . Your annual statement may also have the value for loan purposes . Policies vary widely and there are many factors to consider . The best way to get a current value is to contact your life insurance professional or the insurance company directly . The preceding is for planning purposes only and is not tax or legal advice . Consult with your tax or legal adviser . 