Why might a policyholder consider taking a policy loan?

A policyholder might consider taking a policy loan primarily to access the cash value of their permanent life insurance policy without incurring a penalty. Permanent life insurance policies, like whole life or universal life, accumulate cash value over time. This cash value can be borrowed against, allowing the policyholder to obtain funds when needed, such as for emergencies, major expenses, or investments.

Taking a policy loan is appealing because it does not trigger taxes like a withdrawal might, as long as the policy remains in force. Additionally, the loan does not require a credit check, making it an accessible source of funds. However, it's important for policyholders to understand that the amount borrowed will accrue interest and that any unpaid loans at the time of death will reduce the death benefit payable to beneficiaries.

Options that involve receiving immediate bonus benefits, avoiding premium payments, or canceling a policy do not align with the primary reasons for taking a policy loan, which focuses on borrowing against the cash value while keeping the policy active.