Policy loan(redirected from Life Insurance Loan)
A loan that an insurance company extends to a policyholder with the cash surrender value of the policy as collateral. That is, if the policyholder does not repay the loan, the insurance company may take an equivalent amount out of the policyholder's death benefit. The nature of collateral has historically meant that policy loans carry low interest rates, but this is not always true. It is also called a life insurance loan.