Bruce Brown fell into the life insurance policy loan trap.

Mr. Brown, a commercial litigation attorney, purchased a life insurance policy from Northwestern Mutual Life Insurance Company. For the first six and a half years, he paid the insurance premiums by check. For the next 15 1/2 years, he paid the premiums by borrowing at 8 percent interest against the policy’s cash value.

Because of the borrowing, the Year 22 annual interest accrual was twice the insurance premium due. This was a ... Log in to view full article.