Jayson Lowe compares policy loans, which let you borrow up to 90% of a whole-life insurance policy's cash value with guaranteed collateral, against margin loans secured by volatile stocks or ETFs where the lender can demand more collateral or liquidate your positions. Policy loans give you control over repayment; margin loans don't.
So a margin loan is secured by something. There's collateral there, no different than a policy loan. So when we're talking about a policy loan, we're referring to a dividend-paying whole life insurance contract or a system of contracts, ideally with a mutual life insurance company. You have a contractual provision where you can request a policy loan from the life insurance company at any time for any purpose, and you can borrow up to 90% of the ever-increasing cash value inside of the policy. So the collateral is guaranteed by the life insurance company itself, and the policy owner controls the access and the repayment schedule. The policy owner controls both access and the repayment schedule. If you contrast that with a margin loan, a margin loan could be secured by stocks, ETFs, mutual funds, but the collateral value So remember what I said about cash value, it's ever increasing. I did that like a broken record intentionally. The collateral value for a margin loan is volatile and the lender controls the collateral requirements. So that's sort of the primary difference.
