Who this is for: You own a permanent policy with cash value and want a specific, honest read on the cost of borrowing — including what it costs you beyond the interest.
Who should skip it: You don't own a permanent policy yet — the tool needs a cash-value number, and this isn't a reason to buy a policy.
Your policy
About three minutes.
Showing illustrative numbers. Add your carrier and policy type for a more specific estimate.
What you can borrow
$25,500
About 85–90% of cash value, typical across carriers. You’ve set the slider to borrow $15,000.
Your specific limit depends on carrier and policy type.
What it costs
- Estimated APR
- 7%
- Monthly interest
- $88
- Annual interest
- $1,050
Pick your carrier above for a Direct Recognition–adjusted estimate.
What changes
- Death benefit reduction
- $15,000
- Cash value tied up
- $15,000
- Loan-to-cash-value
- 50%
Premium continues. Pay interest at least annually and the death benefit returns to full when repaid.
Four inputs — your carrier, policy type, cash value, and how much you want to borrow (plus two optional details). No email, no credit pull. The tool returns your borrowing power, your effective rate after Direct Recognition, and the part most calculators leave out: what you give up while the loan is outstanding.
What the tool is doing
It starts with your cash value and the share your policy lets you borrow against — usually 85-90% — to set your borrowing power, then applies the amount you choose to borrow. It takes your carrier's stated loan rate and, if your carrier uses Direct Recognition, adds the dividend gap to show your real effective cost rather than the brochure number. (Direct Recognition, explained covers why those two numbers differ.)
What you trade away
This is the panel most tools skip. Borrowing against a policy has three costs that aren't the interest rate:
- Liquidity, spoken for. The cash value backing the loan is collateral while the loan is out. It's still yours, but it isn't available for the next thing until you repay. The tool shows how much of your cash value the loan ties up.
- Death benefit, reduced. While the loan is outstanding, the death benefit drops by the loan balance, and returns to full when you repay. The tool shows the reduced figure so it's a decision, not a surprise.
- Lapse risk, if ignored. Let interest accrue with no payments and the loan can compound toward the cash value until the policy lapses — which triggers tax on the gains. The tool flags your loan-to-cash-value ratio; one interest payment a year keeps it comfortable.
How to read the result
If the effective rate is well below what you'd pay elsewhere and the liquidity and death-benefit tradeoffs are ones you can live with, borrowing against the policy is usually a sound move. If the tool shows a thin cash-value cushion, a Non-Direct Recognition carrier where Cove saves little, or a death-benefit reduction that matters to your beneficiaries, that's a real signal to slow down. The point of the downside panel is that "yes" and "not yet" are both legitimate answers.
Run your policy through it
Carrier, policy type, cash value, amount. About 3 minutes, no credit pull.
Cove is a pre-launch consumer credit platform for permanent life insurance owners. Calculator outputs are illustrative estimates based on the inputs you provide and publicly available carrier disclosures; your specific terms may differ. Not insurance, legal, or tax advice.
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