Updated September 7, 2023, at 3:00 PM
Loans from cash value life insurance can provide tax-free income if the policy isn’t a modified endowment contract (MEC) and stays in force until death.
Income will vary depending on many factors, including crediting rates, loan rates, insurance costs, and the type of loan or loan features the policy has associated with it.
When you take a loan against an in-force policy, you’re not withdrawing the money from the policy itself. You’re taking a loan that the carrier is issuing to you and the carrier is using your policy cash value as collateral.