how life insurance loan works?

When you have a life insurance policy with cash value, you can take out a loan against the policy's cash value. Here's how it works:

1. Borrowing: You can borrow up to the amount of cash value you have accumulated in your policy. The loan is issued by the insurance company and accrues interest, which you will need to repay in addition to the amount borrowed.

2. Repayment: You can choose to repay the loan in a number of ways, including paying back the loan in a lump sum or making regular payments over time. If you don't repay the loan, the amount you borrowed plus any interest will be deducted from the death benefit paid to your beneficiaries when you pass away.

3. Impact on the policy: Taking out a loan against your life insurance policy can impact the policy's cash value and death benefit. If you don't repay the loan, the insurance company may reduce the cash value or death benefit of the policy to cover the outstanding balance.

4. Tax implications: The loan from your life insurance policy is generally tax-free. However, if the policy lapses or is surrendered, any outstanding loan balance may be considered taxable income.