What Is A Life Insurance Loan? 
A life insurance loan is borrowing funds from the cash value inside of a life insurance policy . You can only borrow money from a life insurance policy if it 's a policy that builds cash value - a permanent life insurance program . Permanent life insurance includes both Universal and Whole life insurance programs . Term life insurance does not build cash value and therefore there 's nothing to borrow from . The maximum amount you can borrow is up to the current surrender or loan value cited in the policy at the time you want to borrow from the cash value . Keep in mind , when you take a loan against your policy , the funds are expected to be paid back and , much like you do when borrowing from a bank , an interest rate is being charged on the borrowed monies . If the insured person under the policy dies with an outstanding loan , the carrier will deduct the outstanding amount and any interest charges from the death benefit and give the difference to the beneficiary . Consult with your agent before borrowing from the cash value to find out what will happen when you create a loan against the policy and what you 're responsible for . I hope the information is helpful - please feel free to contact me for help and if you have any other questions . Thanks very much . 