Life policies can be used as a collateral for loan when the policy has?
- ceased to be life
- been temporary suspended
-
acquired surrender value
- been made paid-up
The correct answer is: 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.