Answer :
Answer:
Explanation:
Frozen cash value life insurance works by allowing the policyholder to accumulate cash value within the policy over time. Here's how it typically works:
1. When a policyholder pays their premium, a portion of that premium goes towards the cost of insurance coverage, and the remaining portion is invested to build cash value.
2. The cash value grows tax-deferred, meaning the policyholder does not pay taxes on the growth of the cash value as long as it remains within the policy.
3. The policyholder can access the cash value through policy loans or withdrawals. Policy loans are essentially borrowing against the cash value of the policy, and withdrawals involve taking out a portion of the cash value.
4. It's important to note that any outstanding policy loans will reduce the death benefit paid out to beneficiaries upon the policyholder's death.
5. The policyholder can choose to "freeze" the cash value, which means they stop paying premiums and allow the cash value to cover the cost of insurance. This can be a useful feature for those who want to maintain coverage without ongoing premium payments.
6. If the cash value is insufficient to cover the cost of insurance, the policy may lapse, leading to a loss of coverage.
7. Overall, frozen cash value life insurance provides both a death benefit and a savings component, offering flexibility and potential growth of funds over time.
