How are policy loans treated?
When a policy loan is taken, loan interest is charged, usually at market rate, from the date of the loan to the next policy anniversary. Each year on your policy anniversary, you will be billed for the annual loan and interest, based on the outstanding loan balance. If the interest is not paid, it will be added to the outstanding loan balance on your policy. If the policy has an outstanding loan at the time of your death, this amount will be deducted from the death proceeds.
