Question

Joshua bought a straight life contract knowing that when it matures the cash value is equal to the death benefit. Before he died, Joshua borrowed the cash value of the policy. How were the proceeds of the policy handled when he died?

Answer 1

When Joshua died, the proceeds of the policy would have been handled by deducting the amount borrowed from the death benefit and paying out the remaining balance to Joshua's beneficiary.

Step-by-step explanation:

When Joshua died, the proceeds of the policy would have been handled in the following way:

1. The amount borrowed by Joshua would be deducted from the death benefit.
2. The remaining balance of the death benefit would be paid out to Joshua's beneficiary.
3. Any outstanding interest on the loan would also need to be repaid to the insurance company.

Let's say Joshua's policy had a death benefit of $100,000 and he borrowed $5,000 from the cash value. If Joshua dies, the $5,000 loan amount would be subtracted from the $100,000 death benefit, leaving $95,000. This $95,000 would then be paid out to Joshua's beneficiary. If there were any outstanding interest on the loan, that would also need to be repaid to the insurance company.