Policy Loan

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."

BREAKING DOWN '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 If the borrower fails to repay the loan, the money is withdrawn from the insurance death benefit.

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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 >>
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    Term life insurance is the most basic of insurance policies. It is nothing more than an insurance policy that provides protection ... Read Full Answer >>
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