If life insurance is pledged as collateral for a loan, how much can be borrowed?

Question

Quizplus · Accepted Answer

When life insurance is pledged as collateral for a loan, the amount that can be borrowed is generally limited to the cash surrender value of the policy. The cash surrender value is the amount that the policyholder would be entitled to receive if they surrendered the policy to the insurer for its cash value. It is not typically equal to the face value of the policy, which is the amount that the insurer would pay out upon the death of the policyholder. Similarly, the amount that can be borrowed is typically not limited to the annual premium, which is the amount that the policyholder pays each year for coverage.

If Life Insurance Is Pledged as Collateral for a Loan