Why would a policyholder consider using a policy loan?

A policyholder might consider using a policy loan primarily to access cash without undergoing a credit check. Policy loans allow individuals to borrow against the cash value of their life insurance policy, which is a built-in feature of permanent life insurance products. This borrowing process does not require a credit check because the loan is secured by the policy itself. As a result, the policyholder can obtain funds more easily than through traditional loan sources, where creditworthiness often plays a major role.

This access to cash can be particularly advantageous in situations where immediate financial needs arise and conventional financing avenues may not be available or convenient. Unlike other types of loans, where qualification criteria can be stringent, policy loans provide a form of liquidity that can be beneficial for unexpected expenses or emergencies.

The other options, while they may touch upon some aspects of financial need, do not accurately reflect why policyholders commonly utilize policy loans. For example, policy loans are not designed as an investment income strategy, nor do they serve to prevent premium increases or directly replace lost income during unemployment. Instead, they primarily offer a way to leverage the cash value of an insurance policy in a straightforward manner.