POLICY LOAN Meaning and
Definition
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A policy loan refers to a form of loan that individuals can obtain by using the cash value of their life insurance policy as collateral. It is an option available to policyholders who have accumulated substantial cash value within their policy.
The process of obtaining a policy loan involves borrowing money against the available cash value of the life insurance policy. The cash value acts as security for the loan, and the policyholder can use the funds for various purposes, such as paying off debts, covering medical expenses, or investments. The loan amount is generally determined by the cash value accumulated in the policy, and the policyholder can borrow a percentage of that value.
Policy loans typically have lower interest rates compared to other types of loans, making them an attractive option for individuals who require quick access to funds. Furthermore, policy loans do not require extensive paperwork or credit checks since they are secured by the policy's cash value, making them accessible to individuals with less than perfect credit history.
However, it is important to note that borrowing against the policy's cash value may reduce the death benefit payable to the beneficiary upon the insured's death. Failure to repay the loan and interest may result in a reduction of the policy's cash value and, in extreme cases, lapse of the policy. Hence, policyholders must carefully consider the terms and conditions of policy loans and their potential consequences before opting for this financial avenue.
Common Misspellings for POLICY LOAN
- oolicy loan
- lolicy loan
- -olicy loan
- 0olicy loan
- pilicy loan
- pklicy loan
- pllicy loan
- pplicy loan
- p0licy loan
- p9licy loan
- pokicy loan
- popicy loan
- pooicy loan
- polucy loan
- poljcy loan
- polkcy loan
- polocy loan
- pol9cy loan
- pol8cy loan
- polixy loan
Etymology of POLICY LOAN
The word "policy" in "policy loan" originates from the Latin word "politicus", which means "civil" or "political". It entered Old French as "policie", referring to "civil administration" or "governmental organization". In English, it became "policy" around the 15th century, initially meaning "political organization" or "governance". Over time, its meaning expanded to include principles or plans of action.
The word "loan" comes from the Old Norse word "lǫn", which meant "a grant" or "a loan". In Middle English, it transformed to "loan" with a similar meaning.
Therefore, the etymology of "policy loan" combines the concept of a financial loan (borrowed capital) with the word "policy", signifying the borrowing against an insurance policy based on certain predetermined principles or guidelines.
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