A policy loan is still a loan.
It can be useful. It can also chew through a policy quietly if interest, crediting, repayment, and lapse risk are left in separate drawers.
Use this worksheet before borrowing from a policy.
Policy-loan questions belong with the existing-policy path: review coverage.
What To Collect
| Field | What to write down | Why it matters |
|---|---|---|
| Current loan balance | Existing principal and accrued interest. | Old loans shape new borrowing room. |
| New loan amount | Amount being considered. | Needed for any repayment plan. |
| Loan interest rate | Current rate and whether it can change. | Borrowing cost is not decoration. |
| Direct recognition status | Direct, non-direct, or other carrier treatment. | Borrowed values may be credited differently. |
| Current cash value | Current value before surrender adjustments. | Used to understand policy capacity. |
| Current surrender value | Cash value after surrender charges. | Exit value matters if the policy weakens. |
| Death benefit | Current and projected death benefit. | Loans can reduce what remains. |
| Planned repayment | Amount and timing. | "We'll pay it back later" is not a plan. |
| Lapse warning | Carrier-provided lapse projection under loan scenario. | A loan-backed lapse can create tax trouble. |
Copyable Questions
Send these before taking the loan:
- What is the current loan interest rate?
- Can the loan rate change?
- Is this policy direct recognition, non-direct recognition, or another structure?
- How will the loan affect dividends, crediting, cash value, and death benefit?
- What happens if I do not repay the loan?
- What repayment amount keeps the policy from weakening under guaranteed assumptions?
- Could the policy lapse with a loan balance?
- If the policy lapses, what tax reporting could be triggered?
- What policy values are guaranteed in the loan scenario?
- Which values are non-guaranteed?
Agent Summary
This tool helps organize policy-loan questions. It does not recommend borrowing, calculate tax treatment, or project a personalized outcome.
Limits
This worksheet does not give borrowing, tax, lapse, or replacement advice. If a future renderer shows non-guaranteed crediting or cash-value figures, the guaranteed figures must sit beside them at equal visual weight.
Related reading: Check an existing policy before you change it.