North Carolina Life Insurance Practice Exam

The loan option allows policyholders to access the cash value of their life insurance policy while still retaining their insurance coverage. When a policyholder takes a loan against their cash value, they are borrowing money from the insurance company using their cash value as collateral. This means they do not have to give up any of their coverage, as the policy remains in force.

The loan must be repaid with interest; however, if the policyholder does not repay the loan, the outstanding amount will be deducted from the death benefit when the insured passes away. This feature is particularly beneficial for those who need immediate funds while maintaining the protective aspect of their life insurance policy.

Other options, such as withdrawals or partial surrender, typically reduce the death benefit and may result in a loss of coverage. The cash value option is not a commonly recognized term in terms of accessing cash value while keeping coverage. Therefore, the loan option is the most suitable answer for accessing cash value without sacrificing insurance protection.