Policy Loan
Definition of "Policy loan"
Amount that the owner of a life insurance policy can borrow at interest from the insurer, up to the cash surrender value. If interest is not paid when due, it is deducted from any remaining cash value. When the cash value is exhausted, the insurance ceases. If the insured dies, any outstanding policy loan and interest due are subtracted from the death benefit. The policy owner may repay the loan in whole or in part at any time; or may continue the loan, as long as the interest plus the principal of the loan do not equal or exceed the cash value (in essence only the interest on the loan must be serviced) or until the policy matures. Insurance companies reserve the right to delay payment of a policy loan for up to six months to protect their solvency, but this has rarely been done since the Depression of the 1930s.
Popular Insurance Terms
One premium payment made to fund the future benefits of a group of employees. ...
Separate legal entity formed by one or more physicians and one or more hospitals whose objective it is to negotiate contracts with payer organizations. The PHO provides financial, ...
Trust in which rights to make any changes therein are retained by the grantor. At the grantor's death all rights become irrevocable. This type of trust has several advantages: it can avoid ...
Federal legislation passed in 1988 (repealed November 23, 1989) that significantly increased the benefit amounts provided under medicare, both Part A and Part B, in the following manner: ...
Law that stipulates the minimum reserve the life insurance company must maintain for its life insurance policies and annuity contracts. This law was first developed by the NAIC as a method ...
Cooperative organization among insurers that rates and prepares new policy forms according to guidelines and regulations of the state insurance department. Loss experience, collected ...
Coverage for liability for damage to property of others from untimely discharge of fire-fighting sprinkler systems. This coverage is available as an endorsement to broad-form comprehensive ...
Combination of several policies with each adding an additional layer or limit of coverage above the limits of the policy that comes before it. For example, Policy A adds $100,000, then ...
Adaptation of a standard insurance contract for special needs. Standard forms do not cover all needs but they can be adapted by an underwriter, broker, or an insurance company at the ...
Have a question or comment?
We're here to help.