| a loan made by a life-insurance company to a policyholder with the cash value of the policy serving as security. |
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 Commentary
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 If the borrower fails to repay the loan, then the money is simply withdrawn from the insurance death benefit.
Related Links
Borrowing from Your Plan
The Importance of Your Credit Rating
Getting the Whole Story on Variable Annuities
See also: Life Insurance, Loan