Whole Life Policy Loans Explained
Many whole life policies allow policyowners to borrow against available cash value. Policy loans generally charge interest and reduce the net amount payable to beneficiaries if they remain outstanding. Understanding the loan provisions helps protect the long-term purpose of your coverage.
By Leif Allison · Educational draft · Pending content review
How policy loans work
A policy loan allows you to borrow against the value supporting your life insurance contract, subject to the insurer's loan provisions.
Unlike a traditional bank loan, a policy loan generally does not require a conventional credit application. However, the loan is not free money.
Interest and repayment
Policy loans accrue interest according to the contract. Unpaid interest may be added to the outstanding balance.
Repayment terms vary by policy. Even when scheduled repayment is not required, allowing a loan balance to grow can create significant risks.
Protecting your policy
Outstanding loans and interest can reduce the death benefit available to your beneficiaries.
Large loan balances can contribute to policy lapse and may create taxable income if a policy terminates with outstanding debt. Review these consequences before borrowing.
Sources and further reading
Carrier sources explain product mechanics; linking to them does not imply an agency appointment or product availability.
Explore Insurance Topics
Term Life
Affordable protection for the years your family needs it most.
Whole Life
Explore permanent coverage and guaranteed policy values.
Final Expense
Plan ahead for funeral costs and final expenses.
IUL
Explore flexible permanent protection and cash-value potential.
Annuities
Understand retirement income and annuity options.
Mortgage Protection
Learn how life insurance can help protect your home.
Talk through your options
Have questions about your coverage options? Let us help you understand what may fit your needs and budget.
Discuss Whole LifeGeneral education only. Coverage, costs and eligibility depend on policy terms and underwriting.