Which type of policy typically allows for loans against its cash value?

Whole life insurance is a permanent life insurance policy that accumulates cash value over time. This cash value is a savings component that grows on a tax-deferred basis, allowing policyholders to borrow against it. When a policyholder takes out a loan against the cash value of their whole life policy, they can do so without having to qualify for a separate loan. The loan terms are often more favorable, as there is no credit check required, and the borrower is simply charged interest on the outstanding amount.

One of the key features of whole life insurance is the guaranteed growth of cash value; this means that, in addition to providing a death benefit, the policy serves as a financial asset for the policyholder. If a loan is taken against the cash value and not repaid, the amount owed will be deducted from the death benefit upon the policyholder's passing. This flexibility allows individuals to access funds when needed, making whole life insurance a financial tool beyond just providing a death benefit.

In contrast, term life insurance does not build cash value, and therefore does not allow loans. Universal life insurance does allow loans against its cash value, but it is not as explicitly tied to guaranteed growth as whole life insurance. Accidental death insurance typically offers no cash value