Life policies can be used as a collateral for loan when the policy has?
-
A.
ceased to be life -
B.
been temporary suspended -
C.
acquired surrender value -
D.
been made paid-up
Correct Answer: Option C
Explanation
A collateral assignment of life insurance is a conditional assignment appointing a lender as the primary beneficiary of a death benefit to use as collateral for a loan. If the borrower is unable to pay, the lender can cash in the life insurance policy and recover what is owed.
‘Surrender Value‘: It is the amount the policyholder will get from the life insurance company if he decides to exit the policy before maturity.