Question

Which of the following best describes the cash loan provision in a life insurance policy?

a. The insurer will automatically use the policy cash value to pay an overdue premium.
b. Withdrawals or partial surrenders of policy cash value can be made; the policy specifies how much can be withdrawn and at what frequency.
c. A policy loan in an amount up to the current cash value, less any existing indebtedness, may be made.
d. Modifications to the policy must be made by an authorized officer of the insurer and attached to the policy.

Answer 1

The best description for the cash loan provision in a life insurance policy is that a policyholder can take out a loan against the policy's current cash value, less any debts. The correct option is c. A policy loan in an amount up to the current cash value, less any existing indebtedness, may be made.

Step-by-step explanation:

The cash loan provision in a life insurance policy can be best described by statement c: A policy loan in an amount up to the current cash value, less any existing indebtedness, may be made.

This means that if you have a cash-value life insurance policy, you can borrow against the accumulated cash value of your policy up to the amount you've accumulated, minus any debts against the policy.

The cash value acts as collateral for the loan, and if the loan, plus interest, is not repaid, the insurance company has the right to subtract the loan amount from the death benefit paid out.

The correct option is c. A policy loan in an amount up to the current cash value, less any existing indebtedness, may be made.