Life insurance loan – flexibility when you need it

Life insurance loan – flexibility when you need it

In addition to providing financial protection for your loved ones, owning a permanent life insurance policy (whole life, universal life, indexed universal life or variable universal life insurance) has some flexibility when you need it.

When you own a permanent life insurance policy, your policy has the potential to build up cash value and you may be able to access the cash value if you need it through a policy loan.

How you use the loaned funds is up to you. Loans can serve as a source of supplemental retirement income, help with a loved one’s college tuition, or help pay for unexpected expenses.

How do life insurance loans work?

When you borrow money, the cash value in your policy acts as collateral for the loan. The loan does accrue interest and is added to the loan balance.

You have control over when and how you repay the loan. If the loan is not repaid before your death, the policy death benefit will be reduced by the outstanding loan balance.

As you consider taking a loan, here are some pros and cons.


  • No credit check, income or approval process. Your financial representative or Ohio National customer service can share if any forms are required for a loan request.
  • You choose your payment plan. There is no required payment plan or payback date for a life insurance loan.
  • The loan is not reported to credit agencies and will not appear on your credit report.
  • Policy loans are not taxable as long as the policy stays in force.


  • Loan interest is charged and added to the loan balance.
  • The death benefit will be decreased by the amount of the outstanding loan and loan interest.
  • To keep the policy insurance coverage, the policy's loan balance cannot exceed the total cash value in the policy, since the cash value is serving as collateral for the loan. If the balance and any interest exceeds the total cash value, payment may be due, otherwise the policy can lapse which would result in loss of insurance and adverse tax consequences.

Loan FAQs

Have more questions about loans? These frequently asked questions may be helpful.

The amount of money you can borrow against your policy is directly connected to the policy’s cash surrender value – the higher it is, the more you can access in a loan. You can’t, however, borrow more than the cash value of your policy (including the loan's interest charges). To find the cash value of your policy, you can log into your account and check the “Cash and Loan Values” sub tab under “Policy Summary.” Use this value as an estimate only. The value may be different due to incoming payments, expenses, etc. To get the most accurate loan value, please contact Customer Service by clicking the “Contact” tab (be sure you are logged into your account). You can fill out the contact form to start the loan conversation. Or, call 800.366.6654.
Generally, loans are tax free. However, if your policy were to lapse, and you had borrowed more money than you paid into the policy, then there may be tax implications.
With a life insurance loan, you get to choose when and how you want to repay the loan. There is no set payment plan.
Loan payments may be made in full or partial payments via automatic bank draft or check. Loan payments are applied to the current year’s interest first and then to principal. There may be other payment options depending on the type of life insurance that you own. Talk to your Ohio National financial representative or customer service to find out what options may be available to you.
Start by talking to your Ohio National financial representative or by calling Customer Service at 800.366.6654. Depending on the amount of your loan request, you may need to complete a form. Limited loan amounts are available via phone.
From the time we receive the request and any necessary paperwork, it usually takes five to 10 business days to process the loan and send a check or to direct deposit the loan proceeds.

Flexibility for life’s changes

If you need additional flexibility with your Ohio National life insurance policy, talk with your Ohio National financial representative or our Customer Service team to see which loan and payment options may be available to you.

Consult your representative before taking a withdrawal or loan. Withdrawals and loans may cause loss of the no lapse guarantee. In addition, withdrawals may incur substantial charges and tax penalties. Withdrawals and loans will reduce the death benefit and cash surrender value. Surrender charges may apply to withdrawals. Consult your policy to see if surrender charges apply. 

Certain policy loans may result in currently taxable income and tax penalties. If tax-free loans are taken and the policy lapses, a taxable event may occur. Loans and withdrawals from life insurance policies that are classified as modified endowment contracts may be subject to tax at the time that the loan or withdrawal is taken and, if taken prior to age 59½, a 10 percent federal tax penalty may apply. 

If you are considering the use of policy loans as retirement income, you should consult your personal tax adviser regarding potential tax consequences that may arise if you do not make necessary payments to keep the policy from lapsing.

Life insurance is issued by The Ohio National Life Insurance Company and Ohio National Life Assurance Corporation. Guarantees are based on the claims-paying ability of the issuer. Loans and withdrawals may reduce the death benefit, cash surrender value and any living benefit amount.

Products, product features, and rider availability vary by state. Issuer not licensed to conduct business in NY.