Page 26 - Life Assurance
P. 26
tracts. The purpose of this provision is to provide
flexibility to the policy owner. The original policy may
no longer be appropriate if family needs and
financial objectives change.
2- Payment of premiums:
Life insurance premiums can be paid annually,
semiannually, quarterly, or monthly. If the premium
is paid other than annually, the policy owner must
pay a carrying charge, which can be relatively
expensive when the true rate of interest is
calculated.
3- Policy loan provision:
Cash-value life insurance contains a policy
loan provision that allows the policy owner to
borrow the cash value. The interest rate is stated
in the policy.
Advantages and Disadvantages of Policy
Loans:
- The major advantage of a police loan is the
relatively low rate of interest that is paid.
- The major disadvantage is that the policy
owner is not legally required to repay the loan,
and the policy could lapse, if the total
indebtedness exceeds the available cash value.
Rather than repay the loan, the policy owner
90 Life41/life/life 08
flexibility to the policy owner. The original policy may
no longer be appropriate if family needs and
financial objectives change.
2- Payment of premiums:
Life insurance premiums can be paid annually,
semiannually, quarterly, or monthly. If the premium
is paid other than annually, the policy owner must
pay a carrying charge, which can be relatively
expensive when the true rate of interest is
calculated.
3- Policy loan provision:
Cash-value life insurance contains a policy
loan provision that allows the policy owner to
borrow the cash value. The interest rate is stated
in the policy.
Advantages and Disadvantages of Policy
Loans:
- The major advantage of a police loan is the
relatively low rate of interest that is paid.
- The major disadvantage is that the policy
owner is not legally required to repay the loan,
and the policy could lapse, if the total
indebtedness exceeds the available cash value.
Rather than repay the loan, the policy owner
90 Life41/life/life 08
