Annuity glossary

Policy Loan

Money borrowed from the insurer using your life insurance cash value as collateral. Loans are generally not subject to income tax while the policy stays in force, but interest accrues and unpaid balances reduce the death benefit. If the policy lapses with a large loan outstanding, the previously untaxed gains can suddenly become taxable income. Policy documents explain the timing, charges, limits, and conditions that apply to the owner.

Any guarantee is backed by the claims-paying ability of the issuing insurer.