Policy loan

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Policy loan

A loan often made at a below-market interest rate from an insurance company to a policyholder that is secured by the cash surrender value of a life insurance policy.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Policy Loan

A loan that an insurance company extends to a policyholder with the cash surrender value of the policy as collateral. That is, if the policyholder does not repay the loan, the insurance company may take an equivalent amount out of the policyholder's death benefit. The nature of collateral has historically meant that policy loans carry low interest rates, but this is not always true. It is also called a life insurance loan.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
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See also: Not all life insurance loans are created equal
To account for potential deterioration in asset characteristics, the agency stressed the portfolio composition regarding three-month plus arrears, as well as interest-only and life insurance loans to the maximum allowed under the replenishment criteria outlined in the transaction documentation.
According to court filings, the bulk of the money from the three life insurance loans is used by Stuart as part of a fraudulent transaction.

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