Policyowner
The person or entity that owns an insurance policy and holds its rights, including naming and changing the beneficiary, assigning the policy, and borrowing against cash value. May or may not be the insured.
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Practice This Concept
A policyowner has borrowed heavily against the cash value of a whole life policy, and the outstanding loan plus accrued interest now exceeds the policy's cash value. What is the most likely result?
The insurer notifies the policyowner, and the policy terminates if the excess is not paid — A policy loan is secured by the cash value. If the loan plus interest grows to exceed the cash value, there is no longer collateral for the debt. The insurer typically gives the policyowner notice and an opportunity to pay the excess; if the policyowner does not, the policy terminates. This is why policyowners are warned that unpaid loans can cause coverage to lapse with possible tax consequences.
National insurance concept
A policyowner of a participating whole life policy instructs the insurer to keep the annual dividends with the company so they can earn interest and grow the policy's value. This dividend option is called:
Accumulation at interest — The accumulation-at-interest dividend option leaves dividends on deposit with the insurer, where they earn interest (taxable when credited) and become part of the policy's value. It differs from cash, which is paid out directly; paid-up additions, which buy small amounts of paid-up whole life; and reduced premiums, which apply the dividend toward the next premium.
National insurance concept
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- TaxationA policyowner surrenders a whole life policy and receives the cash surrender value. Und…
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- Life InsuranceA whole life policy under which the policyowner pays premiums for a limited period, suc…
- Life InsuranceIn a life settlement, the policyowner typically:
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