Adverse Financial Selection

Definition of "Adverse financial selection"

Process in which the policy-holder surrenders the policy when:

  1. cash proceeds can be invested elsewhere at a higher return than that being earned on the cash value within the policy;
  2. economic recession or depression exists and the cash is required to meet other financial obligations. If the policy-holder exercises the CASH SURRENDER VALUE option during these economic circumstances, the company may have to sell assets at a "fire sale" and will have fewer funds to invest at advantageous rates of return.

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