Question 16

Select the appropriate response:

What could be the potential result of taking out a cash value loan under a life insurance policy?

A. Death benefit will be subject to income taxes if the insured dies with an outstanding loan balance.

B. Interest that accrues on the policy loan is tax-deductible to the policyowner.

C. Loan amount will be added to the policyowner's gross income.

D. Reduces the amount receivable upon surrender of the contract.

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Answer :

GinnyAnswer GinnyAnswer · Answer 1 · 2024-08-02T01:15:28-04:00

Taking out a cash value loan under a life insurance policy can affect the death benefit, surrender value, and the policy owner's gross income.

The potential result of taking out a cash value loan under a life insurance policy can include:

Death benefit will be subject to income taxes if insured dies with an outstanding loan balance.
Reduces the amount receivable upon surrender of the contract.
Loan amount will be added to the policy owner's gross income.

It's important to consider these implications before opting for a cash value loan under a life insurance policy.

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