How Does A Whole Life Insurance Loan Work? 
Short answer : You simply tell the insurer that you want to take a out a loan on your policy . The company will then issue you a check in the amount you request up to the allowed maximum that insurer allows . The rest of the story : Legally you are not required to pay back the loan . However , the insurance company is charging you interest on the loan - most charge 8 % . Over time the loan and the interest can eat up the cash values and make the policy implode - or default , or lapse . Whole Life policies are either ` include ' -LRB- most policies -RRB- , or ` exclude ' -LRB- rare -RRB- . What that means is that the cash value accumulation is either included as part of the face amount or it is excluded from the face amount . If it is excluded then the loan will not adversely affect the face amount death benefit ; but since most whole life policies are ` include ' the death benefit will be reduced by the amount of the unpaid loan and interest accumulated . Policy loans are a great way to cover unexpected emergencies , or college tuitions , or a new home down payment ; but I would not just arbitrarily borrow my cash values . That is not a good practice . 