" In traditional participating whole life policies, policyowner dividends were not affected by policy loans, but most participating whole life policies being sold today use what is called “direct recognition” to reduce dividends on policies with outstanding loans. This not only adjusts for the differential in earnings but also discourages policy loans. For universal life policies and other non-participating designs, there are no dividends to adjust; insurers compensate for lost earnings by reducing the earnings rate being credited directly to the cash value. " - Excerpt from McGill's Life Insurance - 9th Edition
Does your life insurance have the Direct Recognition in your contract?
If it does, are there alternatives?
For a Policy Review or to discuss this more, please e-mail me at dkdowell@dkdcpa.com