As long as the policyowner continues to pay premiums, the policy remains in force, but the death benefit is the face amount reduced by
any outstanding policy loans and unpaid interest on the policy loans.
The net surrender value is the gross cash value shown in the policy minus any identifiable surrender charges,
outstanding policy loans, and unpaid interest on policy loans plus any prepaid premiums, dividends accumulated at interest, cash values attributable to paid - up additions, and any additional terminal dividends.
In exchange for a series of premium payments or a single premium payment, upon the death of an insured person the face value (and any additonal coverage attached to the policy), minus
outstanding policy loans and interest, is paid to the beneficiary.
The benefit may include the original or basic policy death benefit, dividends, and supplemental benefits as reduced by
any outstanding policy loans, loan interest, prior policy withdrawals etc. as applicable.
Understand that
any outstanding policy loans will be deducted from the death benefit, resulting in a smaller benefit for your family.»
In exchange for a series of premium payments or a single premium payment, upon the death of an insured person, the face value (and any additional coverage attached to a policy) minus
outstanding policy loans and interest, is paid to the beneficiary of the life insurance policy.
Part of the strategy is to work with mutual life insurance companies that allow flexibility in borrowing from the policy and allow the cash value to accrue regardless of
outstanding policy loans.
Policy loans do accrue interest, and
any outstanding policy loans and interest will reduce the death benefit and cash value.
The actual sum may be higher or lower depending on the options selected,
outstanding policy loans or premium owed.
This amount does not account for any adjustments towards
outstanding policy loans, dividends, paid - up additions, or late premium payments.
Policy loans do accrue interest, and
any outstanding policy loans and interest will reduce the death benefit and cash value (if applicable).
You receive «true» compounding growth of your whole life cash value, even if you have
outstanding policy loans.
The death benefit is the face amount or coverage amount of the policy that will be paid to the named beneficiary upon death of the insured (less
any outstanding policy loans and interest).
If you die with
outstanding policy loans, the death benefit paid would be reduced by your outstanding loan amount.
Age 100 (121 in FL) At that age, the face amount will be paid less
any outstanding policy loans and loan interest
The amount of money paid or due to be paid when a person insured under a life insurance policy dies, after adjustments for
any outstanding policy loans, dividends, paid - up additions or late premium payments (if applicable) are made.
Outstanding policy loans and interest will decrease the death benefit.
With a non-direct recognition life insurance company, the payment of dividends is NOT reduced or negatively impacted by
outstanding policy loans.
Part of the strategy is to work with mutual life insurance companies that allow flexibility in borrowing from the policy and allow the cash value to accrue regardless of
outstanding policy loans.
Even if there is
an outstanding policy loan, AUL continues to pay the same dividend on the cash value.
Guardian practices direct recognition, which means the company adjusts the dividend paid to participating policyholders when there is
an outstanding policy loan.
If you have
an outstanding policy loan, your dividend can be used to pay down all or a portion of your loan.
When there is
an outstanding policy loan, Ameritas pays the dividend based on the cash value that is not being used as collateral for the loan.
As a result, the dividend received when there is
an outstanding policy loan will be less for direct recognition companies than those that practice non-direct recognition, such as MassMutual.
Penn Mutual practices direct vs. non-direct recognition when calculating dividends if there is
an outstanding policy loan.
However, if your policy lapses and you have
an outstanding policy loan, it could result in a taxable event.
Non-Direct Recognition: Non-direct recognition simply means the company does not recognize
an outstanding policy loan when determining interest and dividend paid on your policy's cash value.
Policy Loan Interest
An outstanding policy loan typically will accrue interest daily at the current rate, and the interest is compounded annually.
Policy loan interest not paid when due will become part of
the outstanding policy loan and will also accrue interest.
That way you continue to earn interest crediting on your cash value, even with
an outstanding policy loan.
Policy proceeds may be reduced by
outstanding policy loan amounts.
The Insurance company does however charge interest on
the outstanding policy loan but do not require payments to be made.
As a result, the dividend received when there is
an outstanding policy loan will be less for direct recognition companies than those that practice non-direct recognition, such as MassMutual.
Penn Mutual practices direct vs. non-direct recognition when calculating dividends if there is
an outstanding policy loan.
Ohio National practices non-direct recognition, which means the company continues to credit the full cash value in your policy when computing dividends, even if you have
an outstanding policy loan.
However, if your policy lapses and you have
an outstanding policy loan, it could result in a taxable event.
Even if there is
an outstanding policy loan, AUL continues to pay the same dividend on the cash value.
Since the money in your cash account earns interest, EVEN if you have
an outstanding policy loan, your money earns continuous compound interest.
However, direct recognition companies adjust the dividend amount when there is
an outstanding policy loan, which can affect your arbitrage.
Overloan Protection Rider: This rider can help prevent your policy to lapse because of
an outstanding policy loan.
Not exact matches
There are no taxes if you take out a
policy loan, so long as the
policy remains in effect (meaning the
outstanding loan and interest don't exceed the cash value).
In the event that you die with
policy loans outstanding, your insurance company will deduct the unpaid amount plus any accumulated interest from your death benefit.
In terms of taxation, the excess of the cash surrender value of the
policy (plus any
outstanding loans) over your basis in the contract is treated as taxable income.
And if a
policy lapses with an
outstanding loan in excess of the cost basis, it's taxable.
This
policy can be particularly useful if you have a particular
outstanding expense or
loan, such as a mortgage
loan which would be reduced over time, that your family couldn't cover payments for without your income.
There are no taxes if you take out a
policy loan, so long as the
policy remains in effect (meaning the
outstanding loan and interest don't exceed the cash value).
You might choose a decreasing term
policy for a similar term length and initial death benefit equal to the
outstanding mortgage
loan, since you know your spouse will be financially stable once the mortgage is paid off and you know the time it will take to pay back the
loan.
In addition, you don't have to pay the annual interest so long as the total
outstanding loan (original
loan plus accumulated interest) doesn't exceed the
policy's cash value.
Now, it's typically to your benefit to pay back a
policy loan in a timely manner as the interest compounds annually and the
policy will lapse if the
outstanding loan gets too large.
Plus, if the total
outstanding loan reaches the size of your
policy's cash value, the
policy will lapse.