Policy Loan

AAA

DEFINITION of 'Policy Loan'

A loan issued by an insurance company that uses the cash value of a person's life insurance policy as collateral.

Sometimes referred to as a "life insurance loan."

INVESTOPEDIA EXPLAINS'Policy Loan'

Traditionally, these were loans issued at a very low interest rate, but that is no longer universally true. If the borrower fails to repay the loan, the money is withdrawn from the insurance death benefit.

RELATED TERMS
  1. Life Insurance

    A protection against the loss of income that would result if ...
  2. Whole Life Insurance Policy

    A life insurance contract with level premiums that has both an ...
  3. Loan

    The act of giving money, property or other material goods to ...
  4. Variable Life Insurance Policy

    A form of permanent life insurance, Variable life insurance provides ...
  5. Indemnity

    Indemnity is compensation for damages or loss. Indemnity in the ...
  6. Reinsurance Assisted Placement

    Insurance business that is developed with the help of a reinsurance ...
Related Articles
  1. Retirement

    Borrowing From Your Retirement Plan

    Left with no alternative but to take money out from your retirement savings? Here are some guidelines.
  2. Credit & Loans

    The Importance Of Your Credit Rating

    A great starting point for learning what a credit score is, how it is calculated and why it is so important.
  3. Options & Futures

    Permanent Life Policies: Whole Vs. Universal

    If you're looking for life-long security, choosing between these two is the key.
  4. Options & Futures

    Getting the Whole Story on Variable Annuities

    Variable annuities are another way to save money tax-deferred - but don't jump in blindly!
  5. Retirement

    Life Insurance: How To Get the Most Out Of Your Policy

    There are many benefits to owning a life insurance policy - if you get the right one for you.
  6. Stock Analysis

    What AIG Looks Like Now (and How it Got that Way)

    Despite some mammoth mistakes and a gargantuan government bailout, AIG remains a global insurance powerhouse. Here's how it maintains its position.
  7. Investing

    Advising FAs: Explaining Life Insurance to a Client

    Life insurance was initially designed to protect the income of families, particularly young families in the wealth accumulation phase, in the event of the head of household's death.
  8. Professionals

    How Advisors Can Help Expectant Couples

    Bringing a child into the world makes parents more acutely aware of their finances. Here's how advisors can help expectant couples prepare.
  9. Insurance

    How Does Cash-Value Life Insurance Work?

    Cash-value life insurance pays a beneficiary upon the death of the policyholder, and accumulates a cash value during the policyholder’s lifetime.
  10. Insurance

    Extreme Mortality Bonds: High Risk and High Reward

    Insurance companies issue extreme mortality bonds to cover their losses in the event of a large-scale disaster. Here's a look into these high-risk, high-reward bonds.
RELATED FAQS
  1. What are the pros and cons of life insurance policy loans?

    Like with any type of loan, life insurance policy loans come with pros and cons. It is important to look at both aspects ... Read Full Answer >>
  2. What is the difference between term and universal life insurance?

    Term life insurance is the most basic of insurance policies. It is nothing more than an insurance policy that provides protection ... Read Full Answer >>
  3. What level of reserve ratios is typical for an insurance company to protect against ...

    In the United States, and most developed nations, regulators impose required statutory capital reserve ratios on insurance ... Read Full Answer >>
  4. What risks do I face when investing in the insurance sector?

    Like all equity investments, insurance companies present investors with market risk. Insurance companies, like banks, also ... Read Full Answer >>
  5. What are the main factors that impact share prices in the insurance sector?

    The main factors that impact share prices in the insurance sector are interest rates, earnings and actuarial risk. In the ... Read Full Answer >>
  6. Why do insurance policies have deductibles?

    Insurance policies have deductibles for behavioral and financial reasons. Moral Hazards Deductibles mitigate the behavioral ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Nanny Tax

    A federal tax that must be paid by people who hire household help (a babysitter, maid, gardener, etc.) and pay them a total ...
  2. Dog And Pony Show

    A colloquial term that generally refers to a presentation or seminar to market new products or services to potential buyers.
  3. Topless Meeting

    A meeting in which participants are not allowed to use laptops. A topless meeting organizer can also ban the use of smartphones, ...
  4. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  5. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  6. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!