All of the following are aspects of a life insurance policy loan EXCEPT

• A. It is an advance of money from the policy cash value.
• B. It must be repaid at a certain time.
• C. Interest accrues on the loan balance.
• D. The loan plus unpaid interest will be deducted from the death benefit payable.

Answer: (B)

A life policy loan is money borrowed against the policy’s cash value, with the loan and any accrued interest affecting the policy’s benefits. It is an advance of cash value, so the loan reduces the cash value and builds interest on the outstanding balance. There isn’t a fixed due date that compels repayment of the loan; repayment is at the policyowner’s discretion, though interest continues to accrue and any unpaid loan reduces the death benefit. If the insured dies with an outstanding loan, the loan balance plus interest is deducted from the death benefit before any remaining proceeds are paid. Because of this structure, the statement that the loan must be repaid at a certain time is not an inherent feature of policy loans.