Managing a Growing Loan on a Life Insurance Policy

A loan on a permanent life‑insurance policy will continue to accrue interest, so the balance can grow if payments are missed or insufficient. To stop the loan from expanding, you can make regular repayments that at least cover the accrued interest, increase premium payments, or surrender part of the cash value to pay down the loan.

Repayment strategies

Paying more than the minimum interest each month reduces the principal and prevents compounding growth. Some insurers allow you to set up automatic deductions from a bank account or from the policy's cash value.

Adjusting premiums

Increasing your premium can add cash value, which the insurer can use to offset the loan balance. This approach keeps the policy in force and may preserve death‑benefit protection.

Partial surrender

If you have sufficient cash value, you can surrender a portion of the policy to pay off the loan. This reduces the death benefit proportionally, so weigh the trade‑off.

Policy conversion or replacement

Switching to a policy with lower loan interest rates or converting a term policy to permanent coverage can provide a more favorable loan environment, though fees and underwriting may apply.

When to seek professional help

Complex situations—such as multiple loans, high interest rates, or impending policy lapse—warrant advice from a licensed insurance or financial adviser who can model the long‑term impact.