Non-Recourse Life Insurance

A new type of life insurance is currently becoming popular among seniors. A non-recourse life insurance, designed mostly to weathy older people, is where a finance company loans you or your family trust money to buy a large life insurance policy. This loan only lasts for at least two years.

1. Die Within the Loan Period
If you die within the period of the loan, the estate must pay back the loan in addition to any interest accured and fees. Any money left will go to your heirs and estate. For example, if your life insurance policy is for $5 million and the loan is at an annual rate of 10% interest and you die within 1 year, the party that lended you the money will receive $500,000 plus any additional fees while your heir will receive the remaining amount. You pay nothing out of your pocket until you die and then the money comes from the life insurance policy.

2. Alive After Loan Period Ends
If you are still alive after the loan period ends, you can decide to pay off the loan and keep the policy yourself. This is optimal if you know you will be dying soon.

3. Transfer policy to the Lender
If you are alive after the loan period, you can decide you don't want to pay a monthly life insurance premium, you can transfer the policy to the lender.