A viewer asked: how do you work out the real cost of a loan against your cash value, when you're also earning interest on that cash value? It's a good question, and the answer is annoying. You can make a guess, but you can't calculate it until after the fact.
Take a whole life policy that lets you borrow at 6% and credits 6% back. It looks like a wash. But the 6% credit isn't what you actually see. It's the gross number, and insurance expenses come out of it. A dividend works the same way. When a carrier announces a 6% dividend rate, your policy doesn't necessarily earn 6%. The announced rate is a headline, and what lands in your policy depends on your age, your health class, your mix of base premium and paid-up additions, and how the company splits its dividend pool across policies.
That last piece surprises people. A carrier has to keep each policy on track toward its death benefit at maturity, so it can shift dividends toward some policies and away from others to make that happen. Two people with the same announced rate can see different dividends.
There's another wrinkle. With direct recognition, the carrier changes the dividend on the part of your cash value that's collateral for a loan, so the loan rate can affect what you earn. With non-direct recognition, the dividend on your cash value doesn't depend on whether you've borrowed. In the first case, you'll have to read the statement to see what you were credited on the loaned amount. In the second, the loan rate doesn't change your growth, but you still wait for the year-end statement to see the net dividend.
So the way to find your cost is at your policy anniversary. Take what you paid in loan interest. Subtract what the policy credited to your cash value over the same stretch. If you used the borrowed money to earn something outside the policy, add that too. The result is your actual cost of using the money that year.
The viewer's question is answered in a short video on the real cost of a life insurance loan. A second viewer asked how to make sure loan interest comes in below your gains. You can't make sure. A whole life policy's guarantees are about a wash against the loan rate at best. An IUL gives you a chance of earning more than you pay, which people call arbitrage, but that depends on the index and isn't guaranteed.
What I do is pay the loan interest each year, so it doesn't compound on me while my cash value does. Then I read the anniversary statement before I borrow again. If you haven't set up a place to track those numbers, the one-page loan ledger is a good start.