What is the main feature of policy loans in whole life insurance?

The main feature of policy loans in whole life insurance is that policyholders can borrow against the cash value of the policy, with interest charged on the amount borrowed. Whole life insurance policies build cash value over time, and this cash value can serve as a source of funds for the policyholder. When the policyholder takes out a loan against this cash value, they are not required to repay the loan within a specific time frame, as the loan is essentially a lien against the policy’s cash value. It is important to note that while the loan does accrue interest, if it is not repaid, the outstanding balance, including interest, will be deducted from the death benefit payable to beneficiaries upon the policyholder's death.

This feature provides policyholders with financial flexibility, allowing them to access funds when needed without the need for credit checks or stringent repayment schedules typical of other types of loans. The cash value acts as collateral for the loan, which is a unique aspect of whole life insurance policies.