Inflation Affects Life Insurance

Policy Loans

Policy loans are available to owners of permanent life insurance as a way to access the cash value inside a policy.  As outlined in the linked article, Life Insurance Policy Loan Basics, these policy loans are subject to an interest rate.  If the insurance carrier offers a variable interest rate, the total due on the loan is influenced by inflation.  When the interest rate on the loan becomes too high for the client’s liking, the client has a few options, most notably:  (1) paying back the loan to avoid further interest charges or (2) transferring the cash value and loan to a new policy that has a lower interest rate.  Click on the link to this article, titled Tax-Deferred Exchanges of Life Insurance Under Section 1035 to explore more details about exchanging a policy with a loan for a new policy.

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