Cash Value and Policy Options

What is a policy loan?

A loan secured by a permanent policy’s cash value. Unpaid loans and interest reduce the death benefit.

What are the three basic nonforfeiture options?

Cash surrender, reduced paid-up insurance and extended-term insurance.

What is the cash-surrender option?

The owner cancels the policy and receives its available cash-surrender value.

What is reduced paid-up insurance?

Cash value purchases a smaller fully paid permanent policy.

What is extended-term insurance?

Cash value purchases term coverage for the original face amount for a limited period.

Are life insurance dividends guaranteed?

No. Dividends from participating policies are a return of divisible surplus and are not guaranteed.

What is an automatic-premium-loan provision?

It uses available cash value to pay an overdue premium and prevent the policy from lapsing.