Policy loans are usually available from universal life and whole life insurance contracts

• you can borrow from the cash value (e.g., 90%)
• the insurer deducts the outstanding loan the death benefit

Advantages

• the loan is confidential between you and the insurer
  • loan doesn't show on your credit records —> no effect on other borrowing
• no tax consequences is the loan is taken and repaid in the same calendar year (confirm if also true for loan > ACB)

Disadvantages

• the loan is treated as a partial disposition (since Mar 31, 1978)
  • so the portion of the loan in excess of the ACB is taxable income in the year of receipt
  • solution: limit loans to the ACB

Loan Repayment

• when repaying the loan, can deduct