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14 HOW TO MAKE YOUR LIFE INSURANCE WORK FOR YOU These are called non-forfeiture options, and they mean exactly that. If for any rea- son you are unable to pay premiums, you don't have to lose (forfeit) your life in- surance. The cash value can fund the following options, spelled out in the contract: Automatic premium loan: The cash values already built up in your policy may be used to pay premiums. Obviously, there are limits, depending on how much the cash values have grown over the years. But it does mean you won't have to forfeit your policy immediately if you are unable to meet a premium. It gives you breathing space to decide what to do about maintaining your coverage. Reduced paid-up permanent policy: Your cash value is used to buy a lesser amount of permanent insurance. No further premium payments are required. Extended term insurance: Your cash value is used to buy the same amount of insurance that you currently have, but as term insurance. No further premiums are required. As the new policy is term, it expires at some point. How long it continues depends on how much cash value is available. Obviously, the higher the cash value, the longer the extended term that can be bought. Special built-in safeguards in permanent life policies The build-up of cash values in a permanent life insurance policy can be substantial the longer you hold the policy. It's a fund that can be used, as just mentioned, to keep your policy in force if you miss a premium. It's also available to you directly as a loan: • You may borrow any amount up to or close to the total cash value in your poli- cy, according to your contract. It can be repaid in a lump sum or in installments. Any unpaid balance plus interest is deducted from the proceeds of the policy at the time of your death. • Interest is charged because the pricing of your policy assumes the company will invest those funds and earn interest. • One major advantage is the ease with which you can take out a policy loan. No credit checks, none of the usual hassle. Just request it through your agent or the branch office of your life insurance company. (If you have an irrevocable beneficiary, you'll also need his or her signature.) • The loan may be fully or partially taxable. Check with your insurer about the tax consequences. Policy loans