William Shakespeare famously wrote in "Hamlet," one of his classic tragedies, "Neither a borrower nor a lender be." But sometimes borrowing can't be helped. You may need cash in a hurry and have few other affordable options. In that case, you might consider borrowing funds from a somewhat unusual source: your life insurance policy.

Compared with taking a traditional bank loan, borrowing against a life insurance policy may offer several potential advantages. But this approach, as Shakespeare probably would have cautioned, is not without its perils.

Life insurance has an obvious primary purpose. But if you opt for whole life insurance, variable life insurance, or universal life insurance—varieties of what often is known as permanent life insurance—as opposed to choosing a term policy, part of your premium payments will build cash value in the policy, and you can borrow against that value. You might need money to help pay an emergency medical expense, buy a home, or even send a child to college. Once your financial situation improves, you can pay back the loan.