SPVL is in a special category of life insurance policies called Modified Endowment Contracts (MECs). As a MEC, all withdrawals from SPVL are subject to ordinary income tax on any gains and an additional 10 percent penalty tax for withdrawals made by the policyholder before age 59½.
If circumstances arise where you need some extra cash, SPVL provides you with the ability to borrow against the cash value of your policy in the form of a policy loan. Policy loans can be a viable alternative to other forms of borrowing. With an SPVL policy, you may borrow up to 75 percent of your cash value in the first three policy years and up to 90 percent of the cash value thereafter. But remember, any outstanding policy loan plus interest will be subtracted from any death benefit payable.
However, to make the best use of an SPVL policy, you should have a long-term time horizon for paying premiums and accumulating cash value. We do not recommend that you purchase a policy if you expect to need access to the cash value within the premium-paying period (or perhaps longer). However, if you find yourself in need of some cash, SPVL can provide you with the funds you need.