What action will an insurer take if an interest payment on a policy loan is not made on time?

When an interest payment on a policy loan is not made on time, the insurer will typically add the amount of interest due to the loan balance. This practice is standard among many insurers to ensure the loan remains active, and it allows the borrower to defer the payment without facing immediate penalties or loss of benefits. By adding the unpaid interest to the existing loan balance, the total amount owed increases, but the policyholder retains the option to pay the loan back in the future without the loan being canceled or penalized.

This approach reflects the understanding that policy loans are often used as a financial tool by the policyholder, and this mechanism avoids creating additional financial pressure through penalties or immediate cancellation of the loan. It’s essential for policyholders to be aware that while adding the interest to the loan balance can provide short-term relief, it also means that the borrower will ultimately owe more if they do not make timely payments in the future.