Can I borrow money against my life insurance certificate? If you own a life insurance certificate that builds cash value, such as traditional or universal life, you can take out a loan against the cash value you've built up. If you die before paying back the loan, the balance you owe will be deducted from the death benefit that goes to your beneficiary. Also, if the amount of the loan plus interest exceeds the cash value, the certificate will terminate. Therefore, it is in your best interest to pay back loans. If you own a term life certificate, you cannot take out a loan against it, because term life certificates do not build cash value. For information on the loan value of a certificate, please call the Member Services Department at (800) 627-4762, ext. 4150, or by e-mail. Under the loan option, the insured would have insurance protection for the face amount of the certificate, plus dividends if any, minus any loan indebtedness.

 

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How can I repay the loan?
Every effort should be made to repay the debt to restore the certificate to its full face amount. Interest on a certificate loan accrues daily at the rate specified in the certificate and becomes payable each year on the anniversary of the register date of the certificate.

You may make loan principal payments of $5 or more at any time while the certificate is in force with no premium in default. You can also contact our office and be billed through the mail for the loan payments. Remittances should be indicated as loan payments and sent directly to our Home Office. If you are interested in having loan payments withdrawn from your bank account, please print out and complete a Pre-Authorized Collection Plan form (Form 1025-B) and mail it with a voided check from your checking account or the encoded deposit slip for a savings account to:

 

Premium Accounting Department
Royal Neighbors of America
230 Sixteenth St.
Rock Island, IL 61201-8645

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What happens if I cannot afford to repay the loan?
If the interest is not paid when it becomes due, it is added to and becomes a part of the debt. If the total debt, which includes the principal plus accrued interest and any other indebtedness, at any time equals or exceeds the cash value of the certificate, the certificate will be terminated. Therefore, if you elect a maximum loan, it would be advisable to immediately begin making loan payments to restore the certificate to its full value. For traditional plans of insurance, the dividend option could also be changed to have future dividends applied as payments on the loan. If you are interested in this option, please print out and complete the Election of Change in Dividend Option form (Form 712A). Make certain that the appropriate box is filled in, and mail to:

 

Member Services Department
Royal Neighbors of America
230 Sixteenth St.
Rock Island, IL 61201-8645

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