Define: "Policy Loan"
A loan from the insurance company to the policy owner secured by the policy's cash value.
The policyholder can use the cash value while continuing the insurance protection of the policy by taking a policy loan. The interest rate is specified in the insurance policy. The policyholder may pay the yearly interest and make payments in any desired amount to reduce the loan principal. The policyholder is not required to repay the loan, but if he or she fails to pay the interest, it will be subtracted from the remaining cash value as long as enough cash value remains in the policy.
More Examples 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."
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 If the borrower fails to repay the loan, the money is withdrawn from the insurance death benefit.
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