Understanding John Hancock Life Insurance Loan Interest Rates

What Is a Life Insurance Loan?

A life insurance loan lets policyholders borrow against the cash value of a permanent policy. The loan is unsecured, meaning no collateral is needed, and the repayment schedule is flexible. If the loan is not repaid, the outstanding balance plus interest is deducted from the policy's death benefit.

How John Hancock Sets Its Rates

John Hancock applies a base rate that reflects the company's cost of funds and the policy's type. The rate is typically a fixed percentage above the current prime rate, but it can vary by policy class (e.g., whole life, universal life). The exact percentage is disclosed in the policy's loan policy and can be updated annually.

Factors That Influence the Rate

• Policy type and structure: Whole life loans usually have a slightly higher rate than universal life because of the policy's guaranteed cash value growth.
• Policy age: Older policies may carry a lower rate due to accumulated cash value, but this depends on the insurer's underwriting.
• Loan amount relative to cash value: Larger loans relative to the policy's cash value can trigger a higher rate or additional fees.
• Economic environment: As the prime rate shifts, the base rate adjusts accordingly.

Comparing John Hancock to Competitors

When evaluating loan rates, look at the policy's loan policy statement, which lists the current rate and any applicable fees. Compare these to other insurers by requesting their loan policy documents. Pay attention to:

• Fixed vs. variable rate options.
• Grace periods for repayment.
• Potential for rate caps or limits.

Managing Your Loan Effectively

To keep the loan cost manageable:

• Repay promptly—interest accumulates daily.
• Use dividends or policy dividends to cover interest.
• Review the loan policy annually; rate adjustments may occur.
• Consider partial repayments if the policy's cash value grows enough to offset the loan balance.

What to Check Before Applying

Ask the insurer or your agent:

• Current loan rate and how often it changes.
• Any fees for opening or closing a loan.
• Impact on the policy's death benefit and surrender value.
• Options for converting the loan to a partial or full repayment plan.