Ask the Life Insurance Expert

Can a beneficiary take out a loan on a life insurance policy without the policy owner's consent?

A beneficiary generally cannot take out a loan on a life insurance policy unless the beneficiary is also the policyholder or has power of attorney to make financial decisions for the policyholder.

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A life insurance policy includes three parties:

  • The policyholder, who owns the policy and is responsible for paying the premiums.
  • The insured, whose life is insured.
  • The beneficiary, who receives the death benefit when the insured person dies.

Sometimes one person plays two roles. A wife, for instance, might purchase a policy insuring her husband's life and name herself as beneficiary. In this case, she would be both the policyholder and the beneficiary. Or a husband could purchase a policy insuring his own life and name his wife as beneficiary. In this case, the husband would be the policyholder and the insured.

The policyholder controls all the decisions, including whether to cash out the policy, change the beneficiary or borrow from the cash value.

There is one exception to the rule. If the policyholder completed a power of attorney document appointing someone to make financial decisions for him or her, then that appointee could make decisions regarding the life insurance policy.

Does the beneficiary in your instance have power of attorney?

For more, see Who's who on a life insurance policy.

Last updated: Aug. 9, 2012
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