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Life Policy Collateral Loans

Equitable Life currently has established a relationship with Manulife Bank and the Bank of Montreal (BMO)
to offer collateral loans to our participating whole life and universal life policyholders.

HOW DOES IT WORK?

Equitable Life participating whole life and universal life policyholders can use the cash surrender value of their life insurance policy as collateral for a tax-free bank loan.

  • Collateral loans can be arranged by the policy owner with Manulife Bank, BMO or a financial institution of their choosing.
  • The terms of the agreement are at the discretion of the lending institution and include:
    • Borrowing limit -- can range from 50% to 100% of total cash surrender value.
    • Type of loan -- variable rate term loan, personal line of credit, etc.
    • Payment options - interest only or blend of principal plus interest.
    • Amortization period.
    • Interest rate.
  • Policy is assigned to the lender as collateral for the loan.
  • At death, any outstanding loan plus interest is deducted from the death benefit paid to the beneficiaries.

WHAT IS THE BENEFIT OF COLLATERAL LENDING?

  • Tax-free access to a larger amount of cash than may be accessible through a withdrawal or policy loan.
  • Interest rate is generally lower than the policy loan rate or rates charged by financial institutions for personal loans or lines of credit.
  • Policy values continue to grow on a tax-advantaged basis.
  • Ideal solution for:

WHAT IS THE PROCESS?

Step 1

-

Request an updated inforce illustration for your client's life insurance policy to determine if there is sufficient cash surrender value to request a loan.

Step 2

-

Contact the lender to arrange to have a lending specialist contact your client.

Step 3

-

The lender will contact your client to begin the lending process. They review the possible loan options with your client and help them determine the best lending option for their situation. They will adjudicate the loan, and once approved, will meet with your client to complete the loan paperwork. Throughout the process, you are provided with updates on the loan status and funding.

WHAT INFORMATION WILL YOUR CLIENT NEED TO PROVIDE?

The lending institution will likely ask your client to provide information including:

  • A completed Personal Financial Statement to determine their net worth.
  • An electronic copy or printout of their Equitable Life insurance policy. (The original policy is required in Quebec.)
  • An updated inforce illustration. Contact Customer Service at 1.800.668.4095 or email customerservice@equitable.ca
  • A letter of direction with instructions for the funds once the loan is approved.