Loan (policy Loan)
A loan taken against available value in a life insurance policy under the contract's loan provision.
Why it matters
Interest and unpaid balances can reduce cash value and death proceeds, and may contribute to lapse or a taxable event.
Where you may see it
Loan provision, annual statement, loan request, interest notice, in-force illustration, and payoff quote.
What to verify
Available amount, interest rate and method, due dates, direct versus participating loan treatment, effect on dividends or credits, lapse risk, and tax basis.
Do not confuse it with
A withdrawal, which permanently removes value rather than creating a repayable balance.
Read Loan (policy Loan) in context
Start with the exact sentence where the term appears, then read the definition, schedule, and any referenced rider together. The practical concern is this: Interest and unpaid balances can reduce cash value and death proceeds, and may contribute to lapse or a taxable event. Locate the relevant records—loan provision, annual statement, loan request, interest notice, in-force illustration, and payoff quote.—and compare them with the issued contract rather than a sales summary.
Before signing, changing coverage, or making a claim decision, record the points that control the result: Available amount, interest rate and method, due dates, direct versus participating loan treatment, effect on dividends or credits, lapse risk, and tax basis. If another policy uses similar wording, do not assume it has the same effect.
Keep the dated page or form with your notes. If the definition changes the benefit, premium, ownership rights, or a deadline, ask the issuing insurer for a written explanation tied to the policy number.
Reliable places to check
- Your issued policy and application copy.
- NAIC consumer life insurance resources.
- Your state insurance department for licensing and consumer help.