Neal's life insurance policy has a cash value of $100,000.He wants to purchase a second home to rent out.How much can Neal borrow against the surrender value of his life insurance policy?

Question

Quizplus · Accepted Answer

Typically, individuals can borrow up to 90% of the cash value of their life insurance policy. Therefore, Neal can borrow up to $90,000 against the surrender value of his policy. However, it is recommended to leave some cash value in the policy to continue earning interest and potentially cover future premiums. Therefore, the best choice would be to borrow up to $95,000, leaving $5,000 in the policy as a buffer. Option C is the closest to this amount. Option D is incorrect as borrowing the full $100,000 would leave no cash value in the policy.

Neal's Life Insurance Policy Has a Cash Value of $100,000