Life insurance policy loans represent one of the most versatile and accessible financial tools available to policyholders today. These loans allow you to borrow against your permanent life insurance policy’s cash value component with remarkable flexibility and favorable loan interest rates. Understanding policy loans is essential for optimal financial planning – they remain tax-free in Canada when structured properly, require no mandatory repayment schedule during your lifetime, and typically allow borrowing up to 90% of your cash value. With interest rates averaging 6.25%* in 2025, policy loans operate under contractual terms established at policy issuance that provide certainty and stability compared to traditional loans. Policy loans are the cornerstone mechanism of how Infinite Banking works, allowing you to access your cash value while it continues to grow.
If left unpaid, the outstanding loan balance is simply deducted from the death benefit when the policy pays out. Policy lapses can occur if the outstanding loan plus accumulated interest exceeds the cash value. What distinguishes life insurance loans from conventional financing options like credit cards or equity loans is their accessibility—funds become available within 1-5 business days with no blood tests, credit checks or approval processes required. Policyholders can take multiple policy loans simultaneously as a source of funds, though they should understand that these loans affect dividend calculations and investment growth. Perhaps most compelling is that policy loans offer complete freedom of use, making them ideal for everything from business investments to real estate purchases, educational expenses, or unexpected expenses.
Written by Jose Salloum, Financial Security Advisor, F.S.A., AIBP Authorized Infinite Banking Practitioner | IBC Financial — Canadian Wealth Creation Centre Last updated: April 2026
A life insurance policy loan is a loan from the insurance company that uses the cash surrender value of a permanent life insurance policy as collateral. In Canada, policy loans from exempt life insurance policies are generally not taxable events under the Income Tax Act (Canada), as long as the policy remains in force — the loan does not constitute a disposition under Section 148. Policy loans have no mandatory repayment schedule, require no credit check or income verification, and funds are typically available within 1–5 business days. IBC Financial, led by Jose Salloum, Authorized IBC Practitioner™, uses policy loans as the core mechanism of the Infinite Banking Concept.
[EXISTING ARTICLE BODY — Replace all “cash value component/gains/growth/mixes/accounts” with “cash value” equivalents. Jose verify Advocis survey stats or replace with general statement.]
Policy loans work alongside cash surrender value as the key mechanism in Infinite Banking. For more on how to maximize your policy’s lending capacity, see our guides on borrowing from life insurance and participating life insurance.
Are life insurance policy loans taxable in Canada? Generally no, as long as the policy remains in force. The loan is not a disposition under ITA s.148. If the policy lapses with an outstanding loan, a taxable gain may result.
How do policy loans work in the Infinite Banking Concept? You borrow from the insurance company using your cash value as collateral. Your cash value keeps earning guaranteed interest and dividends. You repay on your own schedule, recapturing interest within your financial system.
What interest rate do policy loans charge in Canada? Typically 4–8% annually depending on carrier and policy type. Some carriers offer fixed rates; others use variable rates set annually.
Can I take multiple policy loans? Yes, as long as total outstanding balances don’t exceed available cash value.
What happens if I don’t repay a policy loan? The outstanding balance plus interest is deducted from the death benefit. If total loans exceed cash value, the policy may lapse — triggering a taxable disposition.
Phone: 438-808-3314 | Email: Info@ibcfinancial.com | Book Online: Schedule Your Free Discovery Meeting
Disclaimer: Life insurance is not an investment product. Policy loan terms determined by the issuing company. Tax treatment governed by ITA s.148. Dividend rates not guaranteed. Jose Salloum is regulated by the AMF in Quebec. IBC Financial is the marketing branch of Canadian Wealth Creation Centre Inc. (CWCC).
Written by Jose Salloum, Financial Security Advisor, F.S.A., AIBP Authorized Infinite Banking Practitioner | IBC Financial — Canadian Wealth Creation Centre Last updated: April 2026
A life insurance policy loan is a loan from the insurance company that uses the cash surrender value of a permanent life insurance policy as collateral. In Canada, policy loans from exempt life insurance policies are generally not taxable events under the Income Tax Act (Canada), as long as the policy remains in force — the loan does not constitute a disposition under Section 148. Policy loans have no mandatory repayment schedule, require no credit check or income verification, and funds are typically available within 1–5 business days. IBC Financial, led by Jose Salloum, Authorized IBC Practitioner™, uses policy loans as the core mechanism of the Infinite Banking Concept.
[EXISTING ARTICLE BODY — Replace all “cash value component/gains/growth/mixes/accounts” with “cash value” equivalents. Jose verify Advocis survey stats or replace with general statement.]
Policy loans work alongside cash surrender value as the key mechanism in Infinite Banking. For more on how to maximize your policy’s lending capacity, see our guides on borrowing from life insurance and participating life insurance.
Are life insurance policy loans taxable in Canada? Generally no, as long as the policy remains in force. The loan is not a disposition under ITA s.148. If the policy lapses with an outstanding loan, a taxable gain may result.
How do policy loans work in the Infinite Banking Concept? You borrow from the insurance company using your cash value as collateral. Your cash value keeps earning guaranteed interest and dividends. You repay on your own schedule, recapturing interest within your financial system.
What interest rate do policy loans charge in Canada? Typically 4–8% annually depending on carrier and policy type. Some carriers offer fixed rates; others use variable rates set annually.
Can I take multiple policy loans? Yes, as long as total outstanding balances don’t exceed available cash value.
What happens if I don’t repay a policy loan? The outstanding balance plus interest is deducted from the death benefit. If total loans exceed cash value, the policy may lapse — triggering a taxable disposition.
Phone: 438-808-3314 | Email: Info@ibcfinancial.com | Book Online: Schedule Your Free Discovery Meeting
Disclaimer: Life insurance is not an investment product. Policy loan terms determined by the issuing company. Tax treatment governed by ITA s.148. Dividend rates not guaranteed. Jose Salloum is regulated by the AMF in Quebec. IBC Financial is the marketing branch of Canadian Wealth Creation Centre Inc. (CWCC).
The policy loan in the Infinite Banking method is a type of loan taken against the cash value of a permanent life insurance policy. The loan is secured by the policy’s cash value but the money actually comes from the insurance company’s general fund. This financial strategy was popularized by R. Nelson Nash in his book “Becoming Your Own Banker” published in 2000, which has sold over 500,000 copies worldwide. As noted by Nelson Nash, the inventor of the Infinite Banking Concept who passed away in 2019 at age 88, this strategy enables individuals to take control of their financial lives by reclaiming the banking function from outsiders.
Unlike a personal loan from a financial institution, a policy-based loan doesn’t require a repayment schedule, making it a flexible option for policyholders seeking access to funds. The policy owner maintains control over repayment terms while the cash value component continues to potentially grow even with an outstanding loan, depending on the type of policy and market conditions.
*Note: Dividend rates on participating whole life insurance policies are declared annually by each insurance company based on the performance of the participating fund. Dividends are not guaranteed. Illustrated rates in any policy illustration are not guarantees of future performance. Past dividend declarations are not guarantees of future dividends. The guaranteed values within a participating whole life policy (guaranteed death benefit, guaranteed cash surrender value) are contractually defined. A licensed Financial Security Advisor can provide you with a personalized policy illustration under your specific circumstances.
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