How Do Variable Life Lines of Credit Work?
A Variable Life policy's cash value is invested in the market, which means it can rise or fall from day to day. Because of that, an Inclined Line of Credit backed by a Variable Life policy works a bit differently than one backed by Whole Life. Here's what makes it unique.
Your Cash Value Moves With the Market
With a Whole Life policy, your cash value grows steadily and predictably. With a Variable Life policy (Variable Whole Life or Variable Universal Life), your cash value is invested in subaccounts offered by your insurance carrier. These subaccounts have direct market exposure, so their value — and with it, your cash value — moves daily, similar to how a brokerage or retirement account behaves.
Variable Life Has Its Own Line of Credit
Because this added market risk changes how we price and manage your line, Variable Life policies can't be combined with Whole Life or Universal Life policies on the same line of credit. If you have both types of policies, you'll need two separate lines: one backed only by your Variable Life policies, and another for the rest.
We require this as it allows us to offer you the most competitive market rates possible on the line of credit backed by your Whole Life policies.
How Your Credit Limit Is Calculated
Your credit limit is based on your policy's Net Cash Value, which is the total cash value, minus any surrender charge (a fee applied if you surrender a policy less than 10 years old). Your credit limit can be as high as 50% of the Net Cash Surrender Value.
Your Credit Limit Can Change Every Market Trading Day
A Variable Life policy's cash value is tied to market investments, so it can rise and fall daily. Since your credit limit is based on that value, it can move with it. We check your policy's value each business day and adjust your credit limit to match:
- If your policy's value drops, your credit limit is automatically reduced to match.
- If your policy's value grows, your credit limit is automatically increased.
Drawing Close to Your Limit Carries More Risk
The closer your balance is to your credit limit, the smaller the market move it takes to push you over it. If you're drawing near your limit, it's worth keeping that cushion in mind as a negative market move could lead to a required payment.
Going Over Your Limit
If a market move ever pushes your balance over your credit limit, draws are paused, and the amount you're over must be paid. If it isn't, your line may be closed and the balance recovered from your policies.
Your account will always show your current credit limit and account balance, so you'll always know where you stand.
How You'll Hear About Changes
Because your credit limit can move daily, we don't send a notification every time it changes. Instead:
- We'll send you a notification if your balance exceeds your credit limit. We'll notify you once per week until the balance overage is resolved.
Have Questions?
If you have any questions about how your Variable Life line of credit works, please reach out to our Support Team at support@inclined.com.