How Policy Loans Work
You borrow against your cash value while it continues to grow and earn dividends. The mechanics are unlike any other loan.
From Becoming Your Own Banker, Chapters 6–7
Policy loans are the engine of IBC, and Nash was careful to correct a common misstatement: "You borrow your own money and pay interest to yourself." That's wrong. Here's what actually happens.
When you take a policy loan, the insurance company lends you money from its general fund — the same pool it uses to lend to corporations and real estate developers. Your cash value stays in the policy as collateral, continuing to earn guaranteed interest and dividends as if you'd never borrowed.
There's no approval process, no credit check, no application. You request a loan and the company sends the money — typically within days. You can borrow up to your available cash value at any time, for any reason. The repayment terms are entirely flexible: any timeline you choose, or even not at all (though unpaid loans reduce your death benefit).
The interest on policy loans goes to the insurance company, not directly to you. But because you're a policyholder-owner of a mutual company, that interest supports the company's dividend-paying capacity — which comes back to all policyholders, including you. The discipline of repaying loans at market rates is what makes the whole system work.