As with other types of permanent life insurance, you can borrow against the cash value of a variable life insurance policy. These loans are not subject to federal income tax regulations the way withdrawals are, but they may be subject to interest charges. If you do not repay the amount you borrowed and your policy terminates because of insufficient funds, you may end up owing taxes on the unpaid sum. Likewise, outstanding withdrawals can diminish your policy’s cash value and death benefit.