Can you borrow from a insurance policy that the premium is paid off?

Answer 1

Most cash value life insurance policies allow for loans by the policy owner even if it is "paid off".

Whether the policy is paid off or not is less important. What is important is the current cash surrender value of the policy, available loan amount, interest rate on said loan, type of policy you own, and your future plans to either pay back the loan or not.

Where some folks run into issues is when they borrow from a policy without the ability or thought to pay back the loan. Generally, when you borrow against your life insurance policy it will reduce your cash surrender value as well as the current death benefit. You will also begin to be charged an interest rate on your loan that should you not pay will accrue and further reduce your death benefit and cash values or at least slow down the growth of your cash value and death benefits. If the loan isn't substantial and you have enough cash value in reserve this may not pose a long term issue. But, if ignored for too long the cash value may be depleted rendering your life insurance obsolete due to a lapse for insufficient value. And, to make matters worse may produce a taxable event to the policy owner.

So, Can you borrow from a paid up life insurance policy?

Generally, yes. But it obviously depends. You should be able to request an "in-force illustration" from your life insurance agent/carrier illustrating the impact of a loan based on if you pay it back or not. This is a simplified answer but generally yes you have the option to borrow from a policy IF there is value to borrow against and IF that carrier will allow it. Is it wise to borrow is another question.