Which of the following is true about loans on universal life policies?

Loans on universal life insurance policies are indeed permitted, making it true that loans are allowed. Universal life policies typically build cash value over time, which policyholders can access through loans. The ability to borrow against the cash value provides flexibility and can be a financial resource for insured individuals, particularly in times of need.

When taking a loan from a universal life policy, the outstanding amount borrowed is deducted from the death benefit if it is not repaid. This is an important factor for policyholders to consider—while loans do not require immediate repayment, the unpaid loan amount can reduce the amount beneficiaries receive upon the policyholder's death. Thus, while loans are accessible, they can have implications for the policy's overall value.

Other options reflect limitations or rules that do not align with how universal life policies operate in practice. For instance, stating that loans are not permitted contradicts a key feature of these policies, while suggesting that loans must be repaid immediately misrepresents the flexibility inherent in universal life policies regarding loans.