Yes, you can borrow from a MetLife life insurance policy if it is a permanent policy that has built up cash value. MetLife, like most insurers, will lend up to roughly 90% of the cash surrender value, with no credit check and no income verification, because the policy itself secures the loan. The money is generally tax-free while the policy stays in force, but interest compounds on the balance and anything you still owe at your death is subtracted from what your beneficiaries receive.
Which MetLife Policies Qualify
Only permanent life insurance builds the cash value a loan is drawn against. MetLife’s whole life, universal life, and variable universal life contracts all accumulate equity over time and include loan provisions. Term life does not qualify, because it covers you for a set period without any savings component.
Owning a permanent policy is not enough on its own. The cash value has to reach a minimum threshold before MetLife will process a loan, and that often takes several years of consistent premium payments. During the early years, a larger share of each premium goes to administrative charges rather than building equity, so new policies rarely have anything meaningful to borrow against. Your most recent annual statement shows your current cash value and, in most cases, the amount available to borrow.
How Much You Can Borrow
The cap is typically around 90% of the cash surrender value, not the full cash value. That buffer keeps the policy from lapsing the moment the loan is issued, since ongoing policy charges still have to be covered. Borrowing right up to the full cash value leaves no cushion, and a single month of accrued interest or deducted charges could push the balance past the threshold.
Cash value and cash surrender value are not the same number. Surrender charges, common in the first 10 to 15 years of many universal life contracts, reduce the amount actually available to you. A policy showing $50,000 in cash value might only have $42,000 in cash surrender value after those charges, so the maximum loan would be roughly 90% of the lower figure. Check the loan availability line on your annual statement or online account for the exact amount rather than estimating.
How to Request a MetLife Policy Loan
MetLife offers a downloadable policy loan request form through its online self-service portal for individual life insurance customers.1MetLife. Life Insurance Policyholders Self-Service You will need your policy number, which is typically eight to ten digits, and you will choose whether to borrow the full available amount or a specific dollar figure. The form also asks for your Social Security number for identity verification and tax reporting.
For the payout, you select either a mailed check or an electronic funds transfer to a bank account you designate. If you choose the transfer, double-check your routing and account numbers; a single transposed digit can delay your funds by days. Sign the form exactly as your name appears in MetLife’s ownership records. If a trust owns the policy, authorized trustees sign and include a copy of the trust certificate.
You can submit the completed form through the secure document center on MetLife’s website or mail it to the life insurance administrative office listed on your policy documents. For smaller loan amounts, some policies allow a request by phone through MetLife’s customer service line. Processing generally takes five to ten business days from when MetLife receives the request, and you can track status through your online account.
Interest Rates and Repayment
MetLife charges interest on the outstanding balance at a rate set in your original policy contract. That rate is either fixed for the life of the loan or variable and tied to a published index. Most states cap policy loan interest rates between 8% and 10%, so even variable rates have a ceiling. Your policy’s loan provision section spells out which type applies and what the current rate is.
Interest is billed annually on the policy anniversary date. If you do not pay it, MetLife adds the unpaid amount to your loan principal, and that larger balance starts accruing interest of its own.2MetLife. Variable Universal Life FAQs This compounding is where policy loans quietly become dangerous. A $20,000 loan at 6% grows to roughly $26,800 in five years if you never make a single payment, and each year the growth accelerates because the interest base keeps expanding.
There is no mandatory repayment schedule. You can pay back any amount at any time, in any mix of principal and interest. That flexibility is a real advantage over a traditional loan, but it also means nobody is going to remind you that your balance is creeping toward a lapse threshold. Treating the annual interest bill as a minimum payment you actually make each year is the simplest way to keep the loan from spiraling.
How a Loan Affects Your Policy
The most immediate impact is on the death benefit. Any outstanding loan balance, including accrued interest, is subtracted from the payout your beneficiaries would otherwise receive. A $100,000 policy with a $15,000 loan balance delivers $85,000 to your heirs. If you have been letting interest capitalize for years, the gap between the stated death benefit and the actual payout can be larger than people expect.
The loaned portion of your cash value also earns a lower credited interest rate than the rest of the policy. MetLife, like most insurers, effectively splits your cash value into a non-loaned portion earning the full rate and a loaned portion earning a reduced rate. Over time this slows the overall growth of your policy’s equity.
One genuine upside: policy loans have no effect on your credit score. Because MetLife does not run a credit check to approve the loan and does not report the balance to credit bureaus, borrowing against your policy is invisible to lenders. That makes it useful when you need cash but do not want an inquiry or new liability on your credit report.
Tax Rules for Policy Loans
Loans from a standard (non-MEC) life insurance policy are not treated as taxable income under federal law. The Internal Revenue Code carves out life insurance and endowment contracts from the general rule that would otherwise treat loans under annuity-type contracts as taxable distributions.3Office of the Law Revision Counsel. 26 USC 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts As long as your policy stays in force and has not been classified as a Modified Endowment Contract, the borrowed money is tax-free regardless of amount.
The Modified Endowment Contract Trap
A Modified Endowment Contract, or MEC, is a life insurance policy that was funded too aggressively relative to its death benefit. If the premiums paid during the first seven years after the policy was issued (or after a material change) exceed the limits of the “7-pay test,” the IRS reclassifies the contract as a MEC.4SEC.gov. The Equity Options Post-Effective Amendment No. 25 Once a policy becomes a MEC, that classification is permanent.
Loans from a MEC are taxed on an income-out-first basis, meaning the IRS treats the loan as a withdrawal of gains before a return of your premium dollars.3Office of the Law Revision Counsel. 26 USC 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts If the policy has appreciated significantly, a large portion of any loan can be taxable. An additional 10% tax penalty applies to the taxable portion if you are under age 59½, unless you qualify for a narrow exception such as disability.5IRS. Revenue Procedure 2001-42
MetLife is required to notify you if your premium payments would cause the policy to become a MEC, and that notification will appear no later than in your annual statement.4SEC.gov. The Equity Options Post-Effective Amendment No. 25 If you have ever made a lump-sum premium payment or added riders that increased funding, confirm your MEC status with MetLife before requesting a loan. The difference between a tax-free transaction and a taxable one plus a 10% penalty is worth a five-minute phone call.
What Happens If You Do Not Repay
There is no due date on a policy loan, but there is still a consequence for ignoring it. When the outstanding balance (principal plus capitalized interest) grows to match or exceed the cash surrender value, MetLife sends a notice and the policy enters a grace period, typically 30 to 61 days. During that window, you can make a payment large enough to bring the balance back below the cash value. If you do not, the policy lapses and coverage ends.
A lapse with a large outstanding loan triggers what financial planners call a tax bomb. The IRS treats the discharged loan balance as policy proceeds and includes it in your gross income for that year, to the extent it exceeds your cost basis in the contract (generally, the total premiums you have paid). You can owe income tax on money you already spent, with no remaining policy to borrow against to cover the bill. Someone who borrowed $80,000 over the years against a policy where they paid $50,000 in premiums would face a taxable gain of $30,000 at lapse, even though they received no new cash that year.
If your loan balance is climbing toward the cash surrender value, pay at least the annual interest to slow the growth. If a lapse looks unavoidable, talk to a tax professional before it happens. Options such as a 1035 exchange into a new policy may defer or reduce the tax hit.
Alternatives to a Policy Loan
Borrowing is not the only way to pull cash out of a MetLife policy, and it is not always the best way.
- Partial withdrawal. You permanently remove a portion of the cash value. No interest accrues because you are not borrowing. The death benefit drops by at least the amount withdrawn, and the reduction is permanent. Withdrawals are generally tax-free up to your cost basis, but any amount above that is taxable as ordinary income.
- Full surrender. You cancel the policy entirely and receive the cash surrender value minus any outstanding loans and surrender charges. Coverage ends. If the payout exceeds total premiums paid, the difference is taxable.
A policy loan makes the most sense when you want to keep your full death benefit intact long-term and plan to repay. A partial withdrawal fits when you need a smaller amount and can accept a permanent reduction in coverage. Surrender is a last resort, appropriate only when you no longer need the coverage and the tax consequences are manageable. In all three cases, confirming your MEC status before acting is the step that prevents a surprise tax bill.