Jayson Lowe breaks down policy loan interest in Canada. Life insurers charge between 5.25% and 8% depending on the carrier, calculated daily and compounded annually. What matters most is the cash flow and who gets the money, not the rate itself.
5.25% to 8% (depends on the life carrier).
Simple interest calculated daily; compounds on the policy anniversary or once per year.
Well, it depends on the life carrier. You know, the simple interest calculation can range anywhere from 5.25% to 8%. And so it depends on the life carrier. But the simple interest that's applied to a policy loan balance is just that, it's simple interest. So it's calculated daily compounds on the anniversary date of the policy or once per year. And so it's very inexpensive capital. And one of the fatal errors that happens when people are looking at this process is that they think it's a function of rates. This has nothing to do with rates. This has everything to do with the flow of the money and who's getting it. And so if you access a policy loan from the insurance company at 8% and you repay that policy loan even with just the 8%, I always put more capital in. But let's say it's 8%, you get to re access everything you put back in. So the rate doesn't matter.
